White-Collar Exemptions Explained: Executive, Administrative & Professional (2025)
- Under the Fair Labor Standards Act (FLSA), white-collar exemptions remove overtime and minimum-wage protections only when all three conditions are met: the salary basis test, the salary level threshold, and the appropriate duties test (executive, administrative, or professional).
- Job titles don’t decide status. What the employee actually does—supervision, discretion, advanced knowledge—controls.
- Salary basis means a predetermined weekly amount not reduced due to variations in the quality or quantity of work, with only limited regulatory deductions.
- Salary level is a numeric threshold that can change by rulemaking; state law may impose higher thresholds. Always check the jurisdiction where the employee works.
- Some roles (e.g., teachers, lawyers, and doctors) have special rules and are not subject to the standard salary-level requirement; outside sales and certain computer employees follow different pay structures.
How the three tests fit together
To treat a worker as exempt, an employer must satisfy all three elements simultaneously for the given classification. If any element fails, the employee is non-exempt and is entitled to minimum wage and overtime (time-and-a-half after 40 hours in a workweek). Below is a high-level map.
- Fixed weekly pay for any week with any work performed.
- No deductions tied to hours, output, or minor quality issues.
- Only narrow, permitted deductions (e.g., full-day personal absences, certain discipline, unpaid FMLA, first/last week proration).
- Weekly amount must meet or exceed the federal threshold for EAP exemptions (check current DOL figure) and any higher state/local rule.
- Certain nondiscretionary bonuses may count towards the level within regulatory limits.
- Role must meet the substantive criteria for executive, administrative, or professional work.
- Primary duty matters; job title alone is irrelevant.
Executive, Administrative, Professional — side-by-side
| Exemption | Primary duty | Key elements | Common examples | Fails when… |
|---|---|---|---|---|
| Executive | Management of the enterprise or a recognized department/subdivision. |
|
Store manager with staff; operations manager over a shift; department head. | “Working lead” spends most time doing the same production work as subordinates; few genuine management decisions. |
| Administrative | Office or non-manual work directly related to management or general business operations of the employer or customers. |
|
HR business partner; compliance analyst; procurement lead; finance/FP&A analyst making recommendations. | Work is tightly prescribed; decisions require constant approval; duties are primarily clerical or production. |
| Professional (Learned/Creative) | Work requiring advanced knowledge in a field of science or learning customarily acquired by prolonged, specialized study; or work requiring invention, imagination, originality, or talent in a recognized creative field. |
|
Engineers (where licensure/degree aligns), accountants, scientists, pharmacists, architects; writers/illustrators whose work is original and creative. | Job primarily follows set techniques; training is through experience only, without specialized academic study; creativity is minor or constrained. |
- Teachers, lawyers, doctors (and some medical interns/residents) are treated separately and are not subject to the standard salary-level test.
- Outside sales is exempt without the salary-level requirement, but duties are specific (making sales away from the employer’s place of business).
- Computer employees can qualify as exempt under their own rule and may be paid hourly at or above a regulatory rate or on a salary/fee basis.
- Highly Compensated Employee (HCE) option uses a higher total-compensation threshold with a relaxed duties screen, but still requires salary basis.
Salary basis: what you can and cannot deduct
| Permissible deductions | Why |
|---|---|
| Full-day absences for personal reasons | Allowed by regulation; preserves the concept of a weekly salary. |
| Full-day disciplinary suspensions | For major safety or conduct violations under a written policy. |
| Unpaid FMLA leave | FMLA can be unpaid; partial-day docking permitted for FMLA hours. |
| First/last week proration | When employment starts or ends mid-week. |
| Impermissible deductions | Risk |
|---|---|
| Partial-day docking (non-FMLA) | Undercuts salary basis → loss of exemption. |
| Reductions tied to workload/quality | Shows pay varies with quantity/quality of work. |
| Ad-hoc penalties for minor infractions | Suggests hourly treatment; back overtime exposure. |
Visual: duties vs. risk of misclassification
Illustrative scale (0–100) comparing how often each category triggers disputes when documentation is weak.
What does “discretion and independent judgment” mean?
For the administrative exemption, the employee must make or significantly influence decisions on matters of significance. Consider whether the person:
- Formulates or affects policy or general business operations, not just carries out set procedures.
- Has authority to interpret or deviate from guidelines without preapproval.
- Evaluates different courses of action and makes recommendations that carry weight.
- Interfaces with leadership, customers, regulators, or vendors to shape outcomes.
By contrast, following detailed manuals, using checklists, or seeking approval for most decisions typically points to non-exempt status.
State law spotlight
Compliance workflow (practical)
- Inventory roles. For every exempt title, document primary duties, typical decisions, and percent of time spent on each duty.
- Map to the correct test. Identify whether the role is executive, administrative, or professional (or an alternative like outside sales/computer).
- Validate salary basis. Ensure payroll does not make improper deductions. Adopt a written safe-harbor policy that reimburses any improper docking promptly.
- Confirm salary level. Check the current federal threshold and compare to state/local requirements; pay the higher standard.
- Train managers. Supervisors should know not to approve off-the-clock work for non-exempt staff and not to dock partial days for exempt staff.
- Audit annually. Re-evaluate whenever job content changes (reorgs, automation, promotions) or when thresholds update.
- Remediate quickly. If misclassification is found, reclassify, calculate back pay, and adjust policies going forward.
Concrete examples (paste into your SOP)
| Scenario | Good practice | If ignored… |
|---|---|---|
| “Assistant manager” spends 85% of time at cashier | Likely non-exempt. Title ≠ duties. Pay overtime or change workload to real management. | Back overtime, penalties, potential class claims. |
| Analyst drafts policies, negotiates vendor terms, decides thresholds | May be administrative-exempt if discretion is real and pay meets basis/level tests. | If decisions are scripted/approved, exemption fails. |
| Engineer without specialized degree follows detailed test scripts | Probably non-exempt. Consider technician classification. | Misclassification risk if treated as learned professional. |
| Exempt manager docked four hours for tardiness | Use PTO or discipline without docking base pay. | Salary basis compromised → overtime liability. |
Quick Guide
- Three tests must be met: salary basis, salary level, and duties.
- Executive: manages a unit, supervises 2+ FTE, hire/fire or weighty input, management is primary duty.
- Administrative: office/non-manual work tied to management or general business operations; discretion on matters of significance.
- Professional: advanced knowledge from specialized study (learned) or originality/creativity (creative).
- Titles don’t matter; documentation of duties does.
- State thresholds can exceed federal rules; apply the more protective standard.
- Safe-harbor policy and prompt reimbursement of improper deductions help preserve salary basis.
- Re-audit during reorgs or when rules change.
FAQ
Does being “salaried” automatically make someone exempt?
No. Salary basis is only one part. The job must also meet the salary level and a duties test. Missing any piece means the worker is non-exempt.
How much must an exempt employee be paid?
There is a weekly salary threshold under federal rules that can change by regulation. Some states set even higher thresholds. Employers should verify the current DOL figure and any state requirement and pay the higher amount.
What is the difference between “learned” and “creative” professional?
Learned professionals rely on advanced, specialized knowledge (often with a relevant degree or licensure). Creative professionals rely on originality, imagination, or talent in recognized creative fields.
Can partial-day absences be docked for exempt staff?
Generally, no—except for certain FMLA hours. Use leave banks for partial-day absences. Improper docking threatens salary-basis compliance.
Are teachers, lawyers, and doctors subject to the salary-level threshold?
No. These categories have special rules and are not subject to the standard salary-level test, though other criteria still apply.
Do remote workers change the analysis?
The federal tests are the same, but the state law where the employee works may control the threshold and duties nuances.
How does the Highly Compensated Employee (HCE) rule work?
HCE uses a higher total annual compensation figure and a simplified duties screen. The employee must still perform at least one exempt duty of an executive, administrative, or professional employee and be paid on a salary/fee basis.
Can nondiscretionary bonuses count toward the salary level?
Under federal rules, certain nondiscretionary bonuses and incentives can satisfy a portion of the salary-level requirement, subject to caps and a catch-up provision. Check your jurisdiction and plan design.
What records should employers keep for exempt staff?
Job descriptions tied to the duties test, organizational charts showing supervision, compensation records demonstrating salary basis/level, safe-harbor policy, and training acknowledgments for managers.
We promoted a high performer to “manager.” Is that enough?
No. The role’s primary duty must actually be management, including supervising 2+ FTE and having meaningful input on employment decisions.
What if we suspect misclassification?
Consult counsel, assess exposure, reclassify as needed, pay back wages/overtime, and update policies. Voluntary corrections can reduce risk.
Common pitfalls (avoid these)
- Title inflation: “Manager” titles with little real management.
- Docking mistakes: Partial-day deductions that undermine salary basis.
- “Production vs. admin” confusion: Treating core revenue-generating production roles as administrative.
- Degree ≠ exemption: A degree helps, but duties must still qualify.
- One-size-fits-all: Applying the same rule across states without checking local thresholds.
Legal basis & technical references (federal)
- FLSA minimum wage & overtime: 29 U.S.C. §§ 206 (minimum wage), 207 (overtime).
- White-collar exemptions: 29 U.S.C. § 213(a)(1); regulations at 29 C.F.R. Part 541.
- Salary basis & permissible deductions: 29 C.F.R. § 541.602; safe-harbor § 541.603.
- Salary level & HCE: 29 C.F.R. §§ 541.600 and 541.601.
- Executive duties: 29 C.F.R. § 541.100.
- Administrative duties: 29 C.F.R. § 541.200 (including “discretion and independent judgment”).
- Professional duties (learned/creative): 29 C.F.R. §§ 541.300–.302.
- Teachers, lawyers, doctors: 29 C.F.R. § 541.303 (teachers) and § 541.304 (law/medicine).
- Outside sales: 29 C.F.R. § 541.500 (no salary-level requirement).
- Computer employees: 29 C.F.R. § 541.400 (may be hourly at specified rate or salaried).
The EAP exemptions turn on how you pay (salary basis), how much you pay (salary level), and what the employee actually does (duties). Document each element, verify state overlays, and re-audit as jobs evolve.
This content is for general information only and is not legal advice. Always confirm current federal and state requirements for your situation.
Executive exemption
Administrative exemption
Professional exemption
Salary basis
Salary level
Duties test
Wage & hour
Misclassification
HR compliance