The Duties Test for Exempt Employees

Duties Test for Exempt Employees

By: Sean Hansen, SHRM-CP | HR Compliance Coordinator

---

Effective July 1st, 2024, the Department of Labor (DOL) increased the federal exempt salary threshold from $35,568 per year ($684 per week), to $43,888 per year ($844 per week). In addition, they increased the highly compensated employee (HCE) total annual compensation threshold, from $107,432 per year to $132,964.

Both of those numbers are set to increase again in 2025. These changes necessitated employers to take a second look at their exempt employees, to determine if that classification was needed.

Compensation is only part of exemption status; the employee must also pass what is known as a ‘duties test’ to be considered exempt from overtime. What is involved in a duties test? Well, it depends.

---

A Quick Recap

We published an article that focused on the salary exempt threshold, and what is involved to pass the ‘salary test’ requirement of exempt status. You can find the full article here: LINK HERE

What’s important to know for this is that in order to be exempt from overtime, an employee must pass the duties test, most of which also include a salary test. The other requirements depend entirely on the category of exemption; the FLSA provides exemptions for multiple categories of employees who can be exempt from overtime.

Listed below are the different types of employees who may qualify for exemption, should they pass the duties tests:

• Executive Employees

• Administrative Employees

• Professional Employees

• Computer Employees

• Outside Sales Employees

• Highly Compensated Employees

There are also some types of employees who the exemptions do not apply to, and should always be compensated for overtime:

• Blue-Collar Workers (Electricians, Carpenters, etc.)

• Police Officers, Detectives, and other law enforcement

• Fire Fighters

• Paramedics, Emergency Medical Technicians, and other emergency medical personnel

• Other first responders

---

Acing the Duties Test

Executive Employees

The FLSA states that in order to qualify for this exemption, four (4) tests must be met:

Compensation	The employee must be compensated on a salary basis at a rate not less than $844 per week, which translates to $43,888 per year. As of January 1st, 2025, this would change to $1,128 per week, or $58,656 per year.
Primary Duty	The employee’s primary duty must be managing the enterprise: or managing a customarily recognized department/subdivision of the enterprise.
Direction	The employee must customarily and regularly direct the work of at least two or more other full-time employees (or the equivalent of such an employee).
Authority	The employee must have the authority to hire/fire other employees, or at least their suggestions and recommendations to change the status of other employees must be given particular weight.

Vocabulary

Primary duty

Refers to the employee’s main and most important duty. How to determine what an employee’s primary duty is entirely on a case by case basis, but the FLSA emphasizes looking at ‘the character of the employee’s job as a whole’.

Customarily and regularly 

The employee should be performing that task on a regular basis, but not necessarily constantly. The task should be done every workweek, but it cannot be an isolated or one-time task, or else it does not fulfill this definition.

Particular weight

This is a tricky one: If the employee is not the one making employment decisions, their recommendation has to still be considered important. Determining particular weight should consider multiple factors, including:

-If it is part of the employee’s job to make these recommendations.

-The frequency in which the recommendations are made. -How often the recommendations are requested or relied upon.

Even if a higher level manager’s recommendation has more importance, it does not preclude the employee’s recommendation from having particular weight.

Business Owners

It’s important to note that there is an exception to these duties. An employee who owns at least a bona fide 20 percent equity interest in the business that employees them, as long as they also engage in its management, would also be considered an exempt executive.

Administrative Employees

Three (3) tests must be met to qualify for this exemption:

Compensation	The employee must be compensated on a salary or fee basis at a rate not less than $844 per week, which translates to $43,888 per year. As of January 1st, 2025, this would change to $1,128 per week, or $58,656 per year.
Primary Duty	The employee’s primary duty must be the performance of office or non-manual work directly related to the management or general business operations of the employer or the employer’s customers.
Primary Duty (2)	The employee’s primary duty includes the exercise of discretion and independent judgement with respect to matters of significance.

Vocabulary

Discretion and independent judgement:

The employee is authorized to make independent choices that are free from immediate supervision. Some factors to consider include, but are not limited to:

-Whether the employee is authorized to either formulate, affect, interpret, or implement management policies or operational practices.

-Whether the employee carries out major assignments in conducting the operations of the business.

-If the employee performs work that affects the business operations to a substantial degree.

-If the employee has authority to commit the employer to matters that have significant financial impact.

-Whether the employee has the ability to waive or deviate from policies or procedures without prior approval.

It does not matter if the employee’s decisions are revised or reversed after the fact; they would still be exercising discretion and independent judgement.

Administrative Employees in Education

There is another avenue for an administrative exemption for those employed in an educational establishment. Employees who fulfill the following criteria are also eligible for the administrative exemption:

Compensation	The employee must be compensated on a salary or fee basis at a rate not less than $844 per week, which translates to $43,888 per year. As of January 1st, 2025, this would change to $1,128 per week, or $58,656 per year. Alternatively, the employee can be compensated on a salary basis which is at least equal to the entrance salary for teachers in the same educational establishment.
Primary Duty	The employee’s primary duty must be the performance of administrative functions directly related to academic instruction or training in an education establishment.

Employees that would be considered as engaging in academic administrative functions include:

• The superintendent or other head of an elementary or secondary school system.

• Any assistants responsible for administrative of matters of curriculum, quality and methods of instructing, measuring and testing the learning potential/achievement of students, establishing and maintaining academic and grading standards, as well as other aspects of the teaching program.

• The principal and any vice-principals responsible for the operation of an elementary or secondary school

• Department heads in institutions of higher education responsible for the various subject matter departments.

• Academic counselors and other employees with similar responsibilities.

Professional Employees

While the professional exemption is its own category, the FLSA has two differing professional duties tests, depending on whether the employee is a learned professional or a creative professional. 

Learned Professional

To qualify for this exemption, the employee must meet the following criteria:

Compensation	The employee must be compensated on a salary or fee basis at a rate not less than $844 per week, which translates to $43,888 per year. As of January 1st, 2025, this would change to $1,128 per week, or $58,656 per year.
Primary Duty	The employee’s primary duty must be the performance of work requiring advanced knowledge, defined as work which is predominantly intellectual in character, and which includes work requiring the consistent exercise of discretion and judgement.
Knowledge	The advanced knowledge must be in a field of science or learning and must be customarily acquired by a prolonged course of specialized intellectual instruction.

Vocabulary

A field of science or learning 

Is an occupation that has a recognized professional status, and is distinguishable from the mechanical arts or skilled trades. Examples of this include, but are not limited to, law, medicine, theology, or biological sciences.

Customarily acquired by a prolonged course of specialized intellectual instruction

Generally means having the appropriate academic degree, but not all learned professionals require this. Learned professionals may have the same knowledge level and perform substantially the same work as degreed employees, but their advance knowledge was attained through the combination of work experience and intellectual instruction. This does not apply to occupations where employees acquire their skill by experience.

Creative Professional

To qualify for this exemption, the employee must meet the following criteria:

Compensation	The employee must be compensated on a salary or fee basis at a rate not less than $844 per week, which translates to $43,888 per year. As of January 1st, 2025, this would change to $1,128 per week, or $58,656 per year.
Primary Duty	The employee’s primary duty must be the performance of work requiring invention, imagination, originality, or talent in a recognized field or artistic or creative endeavor.

Vocabulary

Invention, imagination, originality, or talent

Must be determined on a case-by-case basis. Generally, actors, writers, composers, or similar occupations may qualify for this exemption. Journalists can qualify if they satisfy the duties requirements, but not if they only collect, organize, and record information that is routine or already public, or they do not contribute a unique interpretation of a news product.

Teachers and Practitioners of Law or Medicine

A teacher whose primary duty is teaching, tutoring, instructing, or lecturing in the activity of imparting knowledge in the fields of law and medicine would be considered an exempt professional. The salary and salary basis requirements of the professional exemption do not apply to these employees.

Employees that hold a valid license/certificate permitting the practice of law or medicine would also be considered exempt professionals if they are actually engaged in such a practice. Similarly, an employee who holds the requisite academic degree for the general practice of medicine is exempt, as long as they are engaged in an internship or resident program for the profession. The salary and salary basis requirements of the professional exemption do not apply to these employees.

Computer Employees

To qualify for this exemption, the employee must meet the following criteria:

Compensation	The employee must be compensated on a salary or fee basis at a rate not less than $844 per week, which translates to $43,888 per year. As of January 1st, 2025, this would change to $1,128 per week, or $58,656 per year. Alternatively, these employees can be compensated on an hourly basis, but at a rate not less than $27.63 an hour.
Title	The employee must be employed as a computer systems analyst, computer programmer, software engineer, or other similarly skilled worker in the computer field performing the duties described below.
Primary Duty	The employee’s primary duty must consist of one of the following, or a combination of the following duties, the performance of which requires the same level of skills: o   The application of systems analysis techniques and procedures, including consulting with users, to determine hardware, software or system functional specifications. o   The design, development, documentation, analysis, creation, testing or modification of computer systems or programs. This includes prototypes, based on and related to user or system design specifications. o   The design, documentation, testing, creation or modification of computer programs related to machine operating systems.

This exemption does not include:

• Employees that are engaged in manufacturing or repairing computer hardware or related equipment.

• Employees whose work is dependent or facility by the use of computer/computer software programs (such as engineers) but who are not primarily engaged in computer systems analysis and programming.
  

Outside Sales Employees

To qualify for this exemption, the employee must meet the criteria below:

Note: Unlike many other exemptions, outside sales employees are not subject to a salary test.

Primary Duty	The employee’s primary duty must be making sales or obtaining orders/contracts for services, or for the use of facilities for which a consideration will be paid by the client or customer.
Location	The employee must be customarily and regularly engaged away from the employer’s place(s) of business.

Vocabulary

Away from the employer’s place(s) of business

The employee must be making sales at the customer’s place of business, or their home if selling door-to-door. Sales made by mail, telephone, or the internet are not considered outside sales, unless that contact is in addition to personal calls. In addition, if the salesperson uses their home or office to solicit customers, it would be considered one of the employer’s places of business. Drivers that deliver, but also sell products may qualify as an outside sales employee, but only if they have a primary duty of making sales.

Highly Compensated Employees

To qualify for this exemption, the employee must meet the following criteria:

Compensation	The employees must earn a total annual compensation of $132,964 or more. Part of that compensation may be paid on a salary or fee basis, at not less than $844 per week. As of January 1st, 2025, it would change to $151,164 per year, with at least $1,128 per week paid on a salary basis.
Primary Duty	The employee’s primary duty must include performing office or non-manual work.
Duties	The employee customarily and regularly performs at least one of the exempt duties or responsibilities of an exempt executive, administrative, or professional employee.

That last requirement means that the employee must perform one of the duties we covered previously, as long as it is for an executive, administrative, or professional employee. For example, if an employee meets the first two (2) requirements, and their primary duty is managing an enterprise (as defined in the executive exemption), they would meet the requirements for a highly compensated employee.

In Summary

The Department of Labor (DOL) has published a fact sheet for the various duties tests, which can be found here.

When determining if a position qualifies for exempt status, employers should review the job descriptions they have on hand. If audited, there is a penalty for misclassifying an employee as exempt, but there is no penalty for erring on the side of caution and classifying an employee as non-exempt.

It is also important to note that several states have higher exempt salary threshold requirements, and some have more stringent duties test requirements. The more stringent rule must be applied.

It’s also important to remember that the employee’s salary alone doesn’t cut it. Even in the case of highly compensated employees, whose duties test is very contingent on specific salary requirements, has other criteria that must be met to be considered exempt.

If you are a Vida HR client and need immediate assistance with employment classifications, please reach out to your HR Business Partner for assistance.

---

Duties Test for Exempt Employees