Federal Executive Exemption

To be properly qualified as exempt an executive employee must pass three tests: They must perform certain specific duties, they must be paid the minimum salary for exempt employees as designated by the Department of Labor, and they must be paid on a salary basis, meaning they’ll make the same amount every week regardless of how many hours they work, or the quantity or quality of their work.

Executive Employee Duties Test

1. Primary duty is the management of an enterprise in which the person is employed or a customarily recognized department or subdivision; and
2. Customarily and regularly directs the work of two or more full-time employees (or equivalent); and
3. Has authority to hire, fire, or promote other employees or effectively recommend similar actions

Executive Management Behaviors

•       Interviewing, selecting, and training employees
•       Setting and adjusting their rates of pay and hours of work
•       Planning and directing the work of employees
•       Appraising employees' productivity and efficiency
•       Handling employee complaints and grievances
•       Disciplining employees

Business Owners

A person – whether they are called a business owner or employee – who owns at least a bona fide 20% equity interest in the company, regardless of the type of business organization, and who is actively engaged in its management, is considered a bona fide exempt executive. 

The Fair Labor Standards Act (FLSA) establishes minimum wage, overtime pay, recordkeeping, and youth employment standards affecting employees in the private sector and in Federal, State, and local governments. Read the basic requirements of the FLSA here.