Executive Exemption

To qualify for the executive exemption from FLSA Overtime Requirements, an employee must meet the salary basis and three primary duty requirements for the exemption. This is a conjunctive test, meaning that an employee must satisfy all four requirements to qualify for the exemption.

1. Executive Exemption: Salary Basis Test

To qualify for the executive exemption, an employee must be paid on a salary basis. To be paid on a “salary basis” under the FLSA, an employee must consistently earn the same amount each pay period regardless of quantity or quality of work. As of July 1, 2024, the minimum salary that an exempt professional employee must receive is $844 per week or $43,888 per year. As of January 1, 2025, the salary threshold is set to increase to $1,128 per week or $58,656 per year. Additional about the salary basis test and thresholds.

2. Executive Exemption: Primary Duty Test

The FLSA requires the use of a three-part conjunctive duties test to analyze whether workers qualify for the executive exemption. First, the employee’s primary duty must be “management of the enterprise… or a customarily recognized department or subdivision” of the enterprise. Second, the worker must “customarily and regularly direct the work of two or more other employees.” Third, the worker must have the “authority to hire or fire other employees” or provide “recommendations as to the hiring, firing… or any other change of status of other employees are given particular weight.” 29 C.F.R § 541.100. 

a. Primary Duty Must Be "Management"

An employee’s primary duty must be the “management” of an entire enterprise or a customarily recognized “department of subdivision of the enterprise to meet the FLSA executive exemption duties test.  

29 C.F.R. § 541.100 explains that management includes “activities such as interviewing, selecting, and training of employees; setting and adjusting their rates of pay and hours of work; directing the work of employees; maintaining production or sales records for use in supervision or control; appraising employees’ productivity and efficiency for the purpose of recommending promotions or other changes in status; handling employee complaints and grievances; disciplining employees; planning the work; determining the techniques to be used; apportioning the work among the employees; determining the type of materials, supplies, machinery, equipment or tools to be used or merchandise to be bought, stocked and sold; controlling the flow and distribution of materials or merchandise and supplies; providing for the safety and security of the employees or the property; planning and controlling the budget; and monitoring or implementing legal compliance measures.”

29 C.F.R. § 541.103 explains that a “customarily recognized department or subdivision is meant to “distinguish between a mere collective of employees assigned from time to time to a specific job and a unit with permanent status and function. A customarily recognized department or subdivision must have a permanent status and a continuing function. For example, a large employer’s human resources department might have subdivisions for labor relations, pensions and other benefits, equal employment opportunity, and personnel management, each of which has a permanent status and function.”

B. Must Direct Work of Two or More Employees

To meet the duties test for the executive exemption, an exempt executive must “customarily and regularly also direct the work of two or more other employees.”

  • 29 C.F.R. § 541.104(a) explains that the phrase “two or more employee” means “two full-time employees or their equivalent.” The regulation further explains that directing the work of “four half-time employees” is equivalent.
  • 29 C.F.R. § 541.104(c) clarifies that a worker who merely assists the manager of a particular department or supervises two or more employees only in the actual manager’s absence does not meet this requirement.
  • 29 C.F.R. § 541.104(d) explains that “hours worked by an employee cannot be credited more than once for different executives” Accordingly, a “shared responsibility for the supervision of the same two employees in the same department does not satisfy this requirement,” but that a full-time employee who works four hours for two different supervisors can be “credited as a half-time employee for both supervisors.”

C. Hiring or Firing Authority

To meet the requirements of the executive exemption from federal overtime requirements, the worker must have the “authority to hire or fire other employees” or provide “recommendations as to the hiring, firing… or any other change of status of other employees are given particular weight.”

Under the regulations, determining whether an employee’s recommendations and suggestions are given particular weight is based on whether: (1) it is part of the employee’s job duties to make such suggestions and recommendations; (2) the frequency with which such suggestions and recommendations are made or requested; and (3) the frequency with which the employee’s suggestions and recommendations are relied upon. 29 C.F.R. § 541.105.

Notably, the regulations explain that this element is not satisfied based on an occasional suggestion to change the status of another employee. 29 C.F.R. § 541.105. However, the regulation notes that this element may be satisfied even where a “higher level manager’s recommendation” has more importance and “even where the employee does not have authority to make the ultimate decision as to the employee’s change in status.”

D. Concurrent Duties & Executive Exemption Examples

The regulations explain that the performance of concurrent exempt and non-exempt work does not disqualify an employee from the executive exemption. 29 C.F.R.§ 541.106. Rather, such employees may be exempt based on the general nature of their job duties.

The regulations contrast the general nature of work performed by exempt executives and non-exempt employees who perform concurrent duties. 29 C.F.R. § 541.106(a). Exempt executives “make the decision regarding when to perform nonexempt duties and remain responsible for the success or failure of business operations under their management while performing the nonexempt work.” Whereas non-exempt employees generally have their work “directed by a supervisor to perform the exempt work” or “perform exempt work for defined time periods.”

The regulations further provide examples of when employees performing concurrent work who do and do not qualify as exempt executives:

  • “For example, an assistant manager in a retail establishment may perform work such as serving customers, cooking food, stocking shelves and cleaning the establishment, but performance of such nonexempt work does not preclude the exemption if the assistant manager’s primary duty is management. An assistant manager can supervise employees and serve customers at the same time without losing the exemption. An exempt employee can also simultaneously direct the work of other employees and stock shelves.” 29 C.F.R. § 541.106(b).

 

  • In contrast, a relief supervisor or working supervisor whose primary duty is performing nonexempt work on the production line in a manufacturing plant does not become exempt merely because the nonexempt production line employee occasionally has some responsibility for directing the work of other nonexempt production line employees when, for example, the exempt supervisor is unavailable. Similarly, an employee whose primary duty is to work as an electrician is not an exempt executive even if the employee also directs the work of other employees on the job site, orders parts and materials for the job, and handles requests from the prime contractor. 29 C.F.R. § 541.106(c).

Under the regulations, determining whether an employee’s recommendations and suggestions are given particular weight is based on whether: (1) it is part of the employee’s job duties to make such suggestions and recommendations; (2) the frequency with which such suggestions and recommendations are made or requested; and (3) the frequency with which the employee’s suggestions and recommendations are relied upon. 29 C.F.R. § 541.105.

Notably, the regulations explain that this element is not satisfied based on an occasional suggestion to change the status of another employee. 29 C.F.R. § 541.105. However, the regulation notes that this element may be satisfied even where a “higher level manager’s recommendation” has more importance and “even where the employee does not have authority to make the ultimate decision as to the employee’s change in status.”