Employees Exempt From Minimum Wage and Overtime Provisions

The current federal salary numbers

To qualify as an exempt executive, administrative, or professional employee in the fifty states, the employee must be compensated on a salary basis at a rate of not less than $684 per week, exclusive of board, lodging, or other facilities. 29 C.F.R. § 541.600(a). That weekly rate is the equivalent of $35,568 per year for a full-year worker. 84 Fed. Reg. 51230 (Sept. 27, 2019). Administrative and professional employees may also be paid on a fee basis. 29 C.F.R. § 541.600(a). Up to ten percent of the $684 requirement may be satisfied by nondiscretionary bonuses, incentive payments, and commissions paid at least annually, with a catch-up payment permitted in the following pay period. 29 C.F.R. § 541.602(a)(3).

That level took effect January 1, 2020, replacing the 2004 rule’s $455 per week, or $23,660 per year, a figure that still circulates in older employment materials. The Department of Labor’s 2024 rule would have raised the level to $844 and then $1,128 per week, but two federal district courts vacated that rule, and the Department removed the vacated text from the Code of Federal Regulations effective May 15, 2026, restoring the $684 level: “In light of these judgments, the operative version of the Department’s part 541 regulations is the version of these regulations that was in place on June 30, 2024, prior to the effective date of the 2024 rule, and which the Department has been enforcing.” 91 Fed. Reg. 27833, 27834 (May 15, 2026). The 2024 increases are dead, not merely paused, so do not plan payroll around them.

If you run a payroll cycle other than weekly, the regulation supplies the conversions: the $684 requirement is met by $1,368 biweekly, $1,482 semimonthly, or $2,964 monthly, and no pay period shorter than one week ever satisfies the compensation test. 29 C.F.R. § 541.600(b).

The salary requirement does not reach every exempt employee

The outside sales exemption carries no salary requirement at all: “The requirements of subpart G (salary requirements) of this part do not apply to the outside sales employees described in this section.” 29 C.F.R. § 541.500(c). An outside salesperson paid entirely on commission can still be exempt.

Within the professional exemption, the compensation requirements do not apply to teachers, to employees who hold a valid license or certificate permitting the practice of law or medicine and are actually engaged in that practice, or to medical interns and residents. 29 C.F.R. § 541.600(e). Read the limit on that exception carefully, because it is easy to miss: the exception from the salary or fee requirement “does not apply to pharmacists, nurses, therapists, technologists, sanitarians, dietitians, social workers, psychologists, psychometrists, or other professions which service the medical profession.” 29 C.F.R. § 541.600(e).

Computer employees may meet the compensation requirement on an hourly basis at a rate of not less than $27.63 an hour. 29 C.F.R. § 541.600(d). That figure sits in the statute itself and has never been amended, which is why the 2019, 2024, and 2026 rulemakings left it alone. 29 U.S.C. § 213(a)(17). Job titles decide nothing here either, because “job titles vary widely and change quickly in the computer industry.” 29 C.F.R. § 541.400(a).

If you run a school or college, an academic administrative employee may meet the compensation requirement with a salary at least equal to the entrance salary for teachers at the educational establishment employing that person. 29 C.F.R. § 541.600(c).

Part 541 spreads these tests across eight subparts and roughly fifty sections, and the Department of Labor has rewritten the salary thresholds four times since 2004, most recently effective May 15, 2026. 29 C.F.R. Part 541. Because the answer turns on how the current salary and duties tests apply to a specific position, you benefit from having legal counsel apply the rules as they now read before you treat a position as exempt.

Hourly pay usually defeats the exemption, but not always

Hourly pay generally defeats the executive, administrative, and professional exemptions, which require compensation on a salary basis of at least $684 per week. 29 C.F.R. § 541.600(a). The Supreme Court applied that principle to daily-rate pay in 2023, holding that “daily-rate workers, of whatever income level, qualify as paid on a salary basis only if the conditions set out in §541.604(b) are met.” Helix Energy Solutions Group, Inc. v. Hewitt, 598 U.S. 39 (2023).

Hourly pay is not automatically disqualifying. Beyond the $27.63 computer-employee rate, an exempt employee’s earnings “may be computed on an hourly, a daily or a shift basis, without losing the exemption or violating the salary basis requirement, if the employment arrangement also includes a guarantee of at least the minimum weekly required amount paid on a salary basis regardless of the number of hours, days or shifts worked, and a reasonable relationship exists between the guaranteed amount and the amount actually earned.” 29 C.F.R. § 541.604(b).

Every element of a test must be met

Under the executive exemption, the employee must be compensated on a salary basis at not less than $684 per week, have a primary duty of management of the enterprise or of a customarily recognized department or subdivision, customarily and regularly direct the work of two or more other employees, and have authority to hire or fire other employees or have hiring and firing recommendations given particular weight. 29 C.F.R. § 541.100(a).

Under the administrative exemption, the employee must be compensated on a salary or fee basis at not less than $684 per week, have a primary duty of office or non-manual work directly related to the management or general business operations of the employer or the employer’s customers, and have a primary duty that “includes the exercise of discretion and independent judgment with respect to matters of significance.” 29 C.F.R. § 541.200(a).

Under the professional exemption, the employee must be compensated on a salary or fee basis at not less than $684 per week and have a primary duty of work requiring knowledge of an advanced type in a field of science or learning customarily acquired by a prolonged course of specialized intellectual instruction, or work requiring invention, imagination, originality, or talent in a recognized field of artistic or creative endeavor. 29 C.F.R. § 541.300(a).

With no salary test in play, the outside sales exemption has only two requirements: a primary duty of making sales or of obtaining orders or contracts for services or for the use of facilities, and being customarily and regularly engaged away from the employer’s place or places of business in performing that duty. 29 C.F.R. § 541.500(a). Incidental deliveries and collections, writing sales reports, updating the sales catalogue, planning itineraries, and attending sales conferences all count as exempt outside sales work. 29 C.F.R. § 541.500(b).

For the executive, administrative, and professional exemptions, an employee whose duties fully satisfy the criteria is still non-exempt if the pay arrangement fails the compensation requirement of section 541.600, which sets the $684 weekly salary basis rate and also supplies the fee basis alternative for administrative and professional employees, the academic administrative and computer employee alternatives, and the exceptions for teachers, practicing lawyers and physicians, and medical interns and residents. 29 C.F.R. § 541.600. That limit does not reach outside sales employees, because the subpart G salary requirements do not apply to them. 29 C.F.R. § 541.500(c).

What counts as discretion

Both the administrative and the professional exemptions turn on discretion, but the standards are not identical. An administrative employee’s primary duty must include the exercise of discretion and independent judgment with respect to matters of significance. 29 C.F.R. § 541.200(a). A learned professional’s advanced-knowledge work must require “the consistent exercise of discretion and judgment.” 29 C.F.R. § 541.301(b). The creative professional test asks instead for invention, imagination, originality, or talent. 29 C.F.R. § 541.302. Minnesota’s administrative tests require that the employee regularly exercise discretion or independent judgment. Minn. R. 5200.0200.

Discretion does not reach ordinary day-to-day calls. Minnesota’s rule draws the line between “those employees empowered to independently commit their employers on matters of importance and those employees who merely make day-to-day decisions which, although necessary to the daily operations of the employer’s business, are routine, or follow prescribed procedures, or involve a determination of whether specific standards are met, or are lacking in substantial importance to the employer’s business as a whole.” Minn. R. 5200.0180, subp. 3. Federal law reaches the same result: discretion and independent judgment “must be more than the use of skill in applying well-established techniques, procedures or specific standards described in manuals or other sources.” 29 C.F.R. § 541.202.

Two further points from the Minnesota rule are worth testing your own classifications against. The operative question is “whether the decisions being made involve a discretion as to company policy or procedure or commit the employer on matters of substantial importance,” and “[m]ere recommendations with respect to policies and procedures are not sufficient unless it can be shown that the employer consistently accepted and followed those recommendations.” Minn. R. 5200.0180, subp. 3. Support work counts as exempt only where the employee actually performs the executive or administrative function it relates to, and it “is not sufficient to claim certain work is exempt where the executive or administrative function it might be directly related to is not performed by the employee.” Minn. R. 5200.0180, subp. 5.

Minnesota also defines the term the executive test turns on: to “manage” means “to control and direct the business operations of a given enterprise, department, or branch establishment,” through decisions and directions to other employees involving skill and judgment, and it covers employees who act primarily in a directive capacity rather than those who primarily do the actual work. Minn. R. 5200.0180, subp. 2. If you run multiple shifts, note the cap on the sole-charge route: “Only one employee per enterprise, department, or branch establishment may be considered to be in sole charge regardless of the number of work shifts per day.” Minn. R. 5200.0180, subp. 4.

The primary duties of the employee, not the job title, determine status under Minnesota’s exemption, and “[o]nly where the employee’s primary duties meet all the criteria under a particular test may the employer consider the employee to be exempt from the overtime wage provisions.” Minn. R. 5200.0180, subp. 1.

Blue collar workers and first responders are never exempt under these rules

No matter how highly paid they are, manual laborers and other “blue collar” workers are entitled to minimum wage and overtime premium pay, because the white-collar exemptions reach only employees whose duties are executive, administrative, or professional. The regulation names them: “non-management production-line employees and non-management employees in maintenance, construction and similar occupations such as carpenters, electricians, mechanics, plumbers, iron workers, craftsmen, operating engineers, longshoremen, construction workers and laborers are entitled to minimum wage and overtime premium pay under the Fair Labor Standards Act, and are not exempt under the regulations in this part no matter how highly paid they might be.” 29 C.F.R. § 541.3(a). Blue-collar status is defined by duties, and it is the employee’s pay level that is irrelevant. That section removes only the section 13(a)(1) exemptions and the regulations in Part 541. 29 C.F.R. § 541.3(a).

The same regulation carries a second categorical exclusion. Police officers, detectives, deputy sheriffs, state troopers, investigators, inspectors, correctional officers, parole and probation officers, park rangers, firefighters, paramedics, emergency medical technicians, ambulance personnel, rescue workers, and similar employees are outside the white-collar exemptions “regardless of rank or pay level,” and a police officer or firefighter does not become an exempt executive “merely because the police officer or fire fighter also directs the work of other employees in the conduct of an investigation or fighting a fire.” 29 C.F.R. § 541.3(b).

The highly compensated employee test

An employee with total annual compensation of at least $107,432 is deemed exempt if the employee customarily and regularly performs any one or more of the exempt duties or responsibilities of an executive, administrative, or professional employee. 29 C.F.R. § 541.601(a). The $100,000 figure carried in older materials was the 2004 level and was raised effective January 1, 2020, and the 2024 rule’s higher figures of $132,964 and $151,164 were vacated and removed from the Code of Federal Regulations effective May 15, 2026.

Two conditions inside that test are easy to miss. “Total annual compensation” must include at least $684 per week paid on a salary or fee basis, may include commissions and nondiscretionary bonuses earned during a 52-week period, and “does not include board, lodging and other facilities as defined in § 541.606, and does not include payments for medical insurance, payments for life insurance, contributions to retirement plans and the cost of other fringe benefits.” 29 C.F.R. § 541.601(b). If a commission-heavy year falls short, you may make one final catch-up payment during the last pay period or within one month after the end of the 52-week period, and an employee who works only part of the year may qualify on a pro rata portion of the threshold. 29 C.F.R. § 541.601(b).

The larger limit is the kind of work. This test “applies only to employees whose primary duty includes performing office or non-manual work,” so non-management production-line workers and non-management employees in the trades “are not exempt under this section no matter how highly paid they might be.” 29 C.F.R. § 541.601(d).

Paying a salary: the guarantee and the deductions you may take

Subject to the exceptions in the regulation, “an exempt employee must receive the full salary for any week in which the employee performs any work without regard to the number of days or hours worked,” and exempt employees need not be paid for any workweek in which they perform no work. 29 C.F.R. § 541.602(a)(1).

The slow week is its own trap. “An employee is not paid on a salary basis if deductions from the employee’s predetermined compensation are made for absences occasioned by the employer or by the operating requirements of the business. If the employee is ready, willing and able to work, deductions may not be made for time when work is not available.” 29 C.F.R. § 541.602(a)(2).

Deductions from an exempt employee’s guaranteed salary are permitted only in the circumstances the regulation lists: full-day absences for personal reasons other than sickness or disability, full-day absences for sickness or disability compensated under a bona fide plan, good-faith penalties for infractions of safety rules of major significance, unpaid disciplinary suspensions of one or more full days imposed under a written policy applicable to all employees, the initial and terminal weeks of employment, and unpaid leave under the Family and Medical Leave Act. 29 C.F.R. § 541.602(b).

Deductions for partial-day absences generally destroy the salary basis, because the personal-absence, sickness, and disciplinary-suspension exceptions all run in full-day increments. The regulation makes the line concrete: “if an exempt employee is absent for one and a half days for personal reasons, the employer can deduct only for the one full-day absence.” 29 C.F.R. § 541.602(b)(1). Two exceptions allow a smaller reduction. When an exempt employee takes unpaid leave under the Family and Medical Leave Act, you may pay a proportionate part of the full salary for time actually worked. 29 C.F.R. § 541.602(b)(7). A deduction from pay as a penalty for violations of major safety rules “may be made in any amount.” 29 C.F.R. § 541.602(c). Providing unpaid FMLA-qualifying leave “will not cause the employee to lose the FLSA exemption.” 29 C.F.R. § 825.206(a). That exception applies only to employees of covered employers who are eligible for FMLA leave and to leave that qualifies as FMLA leave. 29 C.F.R. § 825.206(c).

Two more deduction rules answer questions that come up constantly. Full-day deductions for sickness or disability are permitted under a bona fide plan, policy, or practice “before the employee has qualified under the plan, policy or practice, and after the employee has exhausted the leave allowance thereunder,” but the absence must still be a full day. 29 C.F.R. § 541.602(b)(2). You may not deduct for jury duty, attendance as a witness, or temporary military leave, but you “can offset any amounts received by an employee as jury fees, witness fees or military pay for a particular week against the salary due for that particular week without loss of the exemption.” 29 C.F.R. § 541.602(b)(3).

You are not required to pay the full salary in the initial or terminal week of employment, and may pay a proportionate part of the salary for the time actually worked in the first and last week, though proportionate pay is not permitted as a recurring practice for employees engaged occasionally for a few days. 29 C.F.R. § 541.602(b)(6). When you calculate a permitted deduction, you may use the hourly or daily equivalent of the employee’s full weekly salary or any other amount proportional to the time actually missed. 29 C.F.R. § 541.602(c). Where the absence is a full day but the employee’s leave bank does not cover all of it, the Department of Labor has said in an opinion letter that you “may make a deduction from the employee’s pay for any portion of the full-day absences that is not accounted for by the leave bank.” U.S. Dep’t of Labor, Wage & Hour Div., Opinion Letter FLSA2018-14 (Jan. 5, 2018).

Charging an absence to a PTO or vacation bank

You may require an exempt employee to charge an absence, including a partial-day absence, against an accrued PTO, vacation, or sick leave bank without losing the exemption, because the leave bank is a fringe benefit rather than salary. The Third Circuit held as much, concluding that “PTO is not part of an employee’s salary” and that “when an employer docks an employee’s PTO, but not her base pay, the predetermined amount that the employee receives at the end of a pay period does not change.” Higgins v. Bayada Home Health Care Inc., 62 F.4th 755 (3d Cir. 2023). That decision is persuasive rather than controlling in the Eighth Circuit, which covers Minnesota. The condition is the one employers forget: the employee must still receive the full salary for any week in which the employee performs any work, so once the bank is exhausted you must keep paying the full salary for a partial-day absence unless an exception in § 541.602(b), such as unpaid Family and Medical Leave Act leave, applies. 29 C.F.R. § 541.602(a)(1).

Minnesota adds two limits enacted after this rule settled. An employer “is not required to provide leave in less than 15-minute increments nor can the employer require use of earned sick and safe time in more than four-hour increments,” Minn. Stat. § 181.9447, subd. 5, and that standard reaches ordinary paid time off made available for absences due to personal illness or injury, Minn. Stat. § 181.9448, subd. 1. Substituting accrued leave for Minnesota Paid Leave benefits is the employee’s election, not yours: an employee “may use vacation pay, sick pay, or paid time off pay in lieu of family or medical leave program benefits.” Minn. Stat. § 268B.06, subd. 5.

Improper deductions, and the policy that protects you

Improper deductions cost you the exemption where the facts demonstrate you did not intend to pay employees on a salary basis, which an actual practice of making improper deductions demonstrates. 29 C.F.R. § 541.603(a). Where an actual practice exists, “the exemption is lost during the time period in which the improper deductions were made for employees in the same job classification working for the same managers responsible for the actual improper deductions,” including employees in that group whose pay could have been docked but was not, while “[e]mployees in different job classifications or who work for different managers do not lose their status as exempt employees.” 29 C.F.R. § 541.603(b).

A one-off payroll mistake is not fatal: “Improper deductions that are either isolated or inadvertent will not result in loss of the exemption for any employees subject to such improper deductions, if the employer reimburses the employees for such improper deductions.” 29 C.F.R. § 541.603(c).

The preventive step is concrete and worth taking now. A clearly communicated policy that prohibits improper pay deductions, includes a complaint mechanism, reimburses employees for improper deductions, and makes a good-faith commitment to comply in the future preserves the exemption for all employees unless you willfully continue making improper deductions after receiving complaints, and “[t]he best evidence of a clearly communicated policy is a written policy that was distributed to employees prior to the improper pay deductions by, for example, providing a copy of the policy to employees at the time of hire, publishing the policy in an employee handbook or publishing the policy on the employer’s Intranet.” 29 C.F.R. § 541.603(d). The rule is not a technicality trap: “This section shall not be construed in an unduly technical manner so as to defeat the exemption.” 29 C.F.R. § 541.603(e).

Bonuses, commissions, and other extra pay

Extra compensation paid on top of a genuine guaranteed weekly salary does not defeat the salary basis or the exemption. Additional compensation “may be paid on any basis (e.g., flat sum, bonus payment, straight-time hourly amount, time and one-half or any other basis), and may include paid time off,” including compensation based on hours worked beyond the normal workweek, so long as the arrangement also guarantees at least the required weekly minimum on a salary basis. 29 C.F.R. § 541.604(a).

The narrow qualification applies only where the employee’s earnings are themselves computed by the hour, day, or shift, in which case the weekly guarantee must be roughly equivalent to the employee’s usual earnings for the normal scheduled workweek. The regulation’s own example is an employee guaranteed at least $725 for any week in which the employee performs any work, normally working four or five shifts, paid $210 per shift. 29 C.F.R. § 541.604(b). That test “does not apply, for example, to an exempt store manager paid a guaranteed salary per week that exceeds the current salary level who also receives a commission of one-half percent of all sales in the store or five percent of the store’s profits, which in some weeks may total as much as, or even more than, the guaranteed salary.” 29 C.F.R. § 541.604(b).

Minnesota reaches the same place by a different route

Minnesota does not write an exemption. Its Fair Labor Standards Act defines “employee” to exclude “any individual employed in a bona fide executive, administrative, or professional capacity, or a salesperson who conducts no more than 20 percent of sales on the premises of the employer.” Minn. Stat. § 177.23, subd. 7(6). Because the state minimum wage and overtime duties reach only an “employee,” an individual within that clause falls outside both. Minn. Stat. § 177.24; Minn. Stat. § 177.25.

Note what the salesperson category is not. Minnesota does not use the federal outside sales test; it applies a quantitative on-premises test, so a salesperson who would qualify as an outside salesperson federally can still be an “employee” in Minnesota if more than 20 percent of that person’s sales happen on your premises. Minn. Stat. § 177.23, subd. 7(6).

Do not read the federal and Minnesota criteria as one set. Minnesota’s own tests keep the pre-2004 long and short test structure, with weekly salary floors ranging from $155 to $250. Minn. R. 5200.0190; Minn. R. 5200.0200; Minn. R. 5200.0210. Federal law requires not less than $684 per week. 29 C.F.R. § 541.600(a). If both laws cover you, you must satisfy each, and the Department’s own regulation says so directly: “The Fair Labor Standards Act provides minimum standards that may be exceeded, but cannot be waived or reduced. Employers must comply, for example, with any Federal, State or municipal laws, regulations or ordinances establishing a higher minimum wage or lower maximum workweek than those established under the Act.” 29 C.F.R. § 541.4.

Read the rest of the same subdivision before you conclude a worker is covered, because some clauses are section-specific and others are not. A minor employed as a corn detasseler is excluded only from the minimum wage section, and an individual employed on a seasonal basis in a carnival, circus, fair, or ski facility only from the overtime section, while the executive, administrative, professional, and salesperson clause carries no such limiter. Minn. Stat. § 177.23, subd. 7(4), (13). The same list also excludes individuals who render service gratuitously for a nonprofit organization, drivers employed by an employer in the business of operating taxicabs, individuals engaged in babysitting as a sole practitioner, seafarers, and individuals in positions for which the United States Department of Transportation has power to establish qualifications and maximum hours of service. Minn. Stat. § 177.23, subd. 7(7), (11), (12), (16), (17).

Minnesota reaches an exemption-like result in two more places by narrowing what counts as time on the clock. For a resident on-site caretaker or manager of a residential building, “hours worked” does not include time when that person is on the premises and available to perform duties but is not performing them. Minn. Stat. § 177.23, subd. 10. For a live-in companionship caregiver who is paid the minimum wage or more for at least four hours associated with the overnight stay, up to eight nighttime hours between 10:00 p.m. and 9:00 a.m. are excluded from “hours” when the employee is available but not in fact performing duties and is free to sleep. Minn. Stat. § 177.23, subd. 11.

What a misclassification costs

If you misclassify an employee, you are liable for the unpaid overtime “and in an additional equal amount as liquidated damages,” and the court “shall, in addition to any judgment awarded to the plaintiff or plaintiffs, allow a reasonable attorney’s fee to be paid by the defendant, and costs of the action.” 29 U.S.C. § 216(b). A court may award no liquidated damages, or a reduced amount, if you show that the act or omission was in good faith and that you had reasonable grounds to believe it was not a violation. 29 U.S.C. § 260. That fee-shifting provision is what makes modest per-employee overtime claims worth bringing as a group. Other similarly situated employees are not swept in automatically, because “[n]o employee shall be a party plaintiff to any such action unless he gives his consent in writing to become such a party.” 29 U.S.C. § 216(b).

There is no open-ended lookback. A claim “may be commenced within two years after the cause of action accrued, and every such action shall be forever barred unless commenced within two years after the cause of action accrued, except that a cause of action arising out of a willful violation may be commenced within three years after the cause of action accrued.” 29 U.S.C. § 255(a). Three years is the ceiling, not a floor.

A willful violation can also carry a criminal fine and, on a repeat offense, imprisonment. 29 U.S.C. § 216(a). There is an off-ramp as well: paying the back overtime under Department of Labor supervision, once accepted in full, waives the employee’s private claim for those wages and for the equal amount of liquidated damages. 29 U.S.C. § 216(c).

Minnesota runs a parallel track. The limitation for recovery of wages or overtime is two years, “except that if the employer fails to submit payroll records by a specified date upon request of the Department of Labor and Industry or if the nonpayment is willful and not the result of mistake or inadvertence, the limitation is three years.” Minn. Stat. § 541.07(5). An employee suing in Minnesota district court may recover the full amount of the wages, gratuities, and overtime compensation plus an equal amount as liquidated damages, and the court must order the employer to pay reasonable costs, disbursements, witness fees, and attorney fees. Minn. Stat. § 177.27, subds. 8, 10

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CREDITS: The content of this and any related posts has been copied or adopted from An Employer’s Guide to Employment Issues in Minnesota, provided by the Minnesota Department of Employment and Economic Development & Lindquist & Vennum P.L.L.P., Tenth Edition, 2009. Copies are available without charge from the Minnesota Department of Employment and Economic Development, Small Business Assistance Office.

This post is also part of a series of posts on Minnesota wage and hour issues.