Exempt versus Non-Exempt Employees: The Executive Exemption
Both the state and federal laws exempt bona fide managers and supervisors as executive employees. In order to qualify for the executive exemption, an employee must meet all of the following criteria:
- The employee’s primary duty must consist of the management of the enterprise or department in which he or she is employed.
- The following work is generally considered exempt work when it is performed by an employee in the management of his or her department or supervision of employees: interviewing, selecting, and training employees; setting and adjusting their rates of pay and hours of work; directing their work; maintaining their production or sales records or use in supervision or control; appraising their productivity and efficiency for the purposes of recommending promotions or other changes in their status; handling their complaints and grievances and disciplining them when necessary; planning the work; determining the techniques to be used; apportioning the work among the workers; determining the type of materials, supplies, machinery or tools to be used or merchandise to be bought, stocked, and sold; controlling the flow and distribution of materials or merchandise and supplies; and providing for the safety of employees and property.
- The employment must customarily and regularly direct the work of two or more other employees. Note these must be two full-time employees or full-time equivalents (i.e., a full-time employee and two part-time employees) and they must be employed in the department that the executive is managing.
- The employee must be paid on a salary basis of at least $475.00 per week ($250.00 under FLSA) This equates to an annual salary of $24,700 and $13,000, respectively.
This is commonly known as the “short test” for determining the executive exemption.
(The weekly salary amounts under the state law were increased in 2001. The weekly salary amounts under the FLSA have not been adjusted in many years to account for inflation and general increases in salary levels, and therefore are quite low by today’s standards.)
Most employees only need to meet the short test requirements. If an employee does not meet the short test requirements, however, then all of the following criteria must be met:
- The employee must be paid on a salary basis of at least $400.00 per week ($155 under the FLSA)
- The employee must meet criteria # 1 and # 2 above, plus:
- The employee either must have the authority to hire or fire employees or make recommendation regarding hiring, firing, promotion or other changes in the status of employees;
- The employee must customarily and regularly exercise discretion and judgment; and
- The employee must not devote more than 20% (or 40% in the case of a retail or service employee) of his or her hours in the workweek to activities that are not directly and closely related to the performance of the work described above.
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