Exemption: What It Means for Employers

What it means in practice

The Fair Labor Standards Act (FLSA) guarantees covered workers a minimum wage and generally requires overtime for hours over 40 in a workweek. As the Supreme Court put it in January 2025, the Act "exempts many categories of employees from the minimum-wage requirement and exempts many more from the overtime-pay requirement." An exemption is therefore a statutory carve-out tied to a type of work, employer or pay arrangement. Under 29 CFR 541.4, FLSA standards cannot be waived or reduced, so it is not a status an employer can grant by agreement.

Three kinds of exemption. Section 13(a) of the Act (29 U.S.C. 213) says the minimum wage and overtime sections "shall not apply" to the employees it lists. Section 13(b) says only the overtime section shall not apply, so those employees must still receive at least minimum wage for all hours worked. Section 7 of the Act then provides partial exemptions that change how or when overtime is computed rather than removing it outright.

The white-collar exemptions, in brief. The best-known exemption, section 13(a)(1), covers bona fide executive, administrative, professional and outside sales employees; most of these must be paid on a salary basis at a set weekly level and meet a duties test. Those salary level, salary basis and duties tests are covered in depth in our guide to exempt vs. non-exempt employees. One detail of the statute is worth noting here: section 13(a) carves out 206(d), the equal pay provision, for 13(a)(1) employees, so the Equal Pay Act still protects white-collar exempt staff.

Section 13(a): no minimum wage and no overtime. Beyond the white-collar group, the statute lists, among others: 13(a)(3), employees of amusement or recreational establishments, organized camps and religious or non-profit educational conference centers that either operate no more than seven months in a calendar year or meet a receipts test; 13(a)(5), employees catching, harvesting or farming fish, shellfish and other aquatic life, including first processing at sea; 13(a)(6), certain agricultural employees; 13(a)(8), employees of weekly, semiweekly or daily newspapers with circulation under 4,000, mostly within the home county or adjoining counties; 13(a)(15), casual babysitters and companions for people who cannot care for themselves because of age or infirmity; 13(a)(17), computer systems analysts, programmers and software engineers whose primary duty is systems analysis or program design, and who, if paid hourly, earn at least $27.63 an hour.

The agricultural exemption under 13(a)(6). According to Fact Sheet #12 (revised January 2025), an agricultural employer that did not use more than 500 man-days of agricultural labor in any calendar quarter of the preceding year does not owe minimum wage or overtime to its agricultural employees in the following year. A man-day is any day on which an employee does agricultural work for at least one hour. The statute also exempts immediate family members of the employer, employees principally engaged in range production of livestock, and certain local piece-rate hand harvest laborers.

Companionship services: current rule status. The regulation at 29 CFR 552.6, issued in 2013 and effective January 1, 2015, defines companionship services as fellowship and protection, plus care only if it does not exceed 20 percent of total hours worked per person and per workweek, and 29 CFR 552.109 bars third-party employers such as home care agencies from claiming the 13(a)(15) or live-in exemptions. On July 2, 2025 the Department of Labor proposed rescinding those 2013 provisions. Field Assistance Bulletin 2025-4 (July 25, 2025) then told investigators to stop enforcing the 2013 rule and not to act against third-party employers claiming either exemption, until a final rule takes effect. As of October 26, 2026 the Federal Register shows no final rule, so the 2013 text remains the codified regulation. The bulletin says it does not alter statutory or regulatory requirements, and that services by trained personnel such as registered or licensed practical nurses are not exempt.

Section 13(b): overtime only. The overtime-only list is longer. Examples from the statute: 13(b)(1), employees whose qualifications and maximum hours the Secretary of Transportation may set under the Motor Carrier Act; 13(b)(2) and (3), employees of rail carriers and air carriers; 13(b)(6), seamen; 13(b)(10), salesmen, partsmen and mechanics primarily engaged in selling or servicing automobiles, trucks or farm implements at non-manufacturing dealers, and salesmen of trailers, boats or aircraft; 13(b)(12), employees employed in agriculture; 13(b)(17), taxicab drivers; 13(b)(20), police and fire employees of public agencies with fewer than 5 employees in those activities; 13(b)(21), live-in domestic service employees; and 13(b)(28), forestry and logging employees of employers with no more than 8 such employees.

Motor carrier exemption. Fact Sheet #19 says 13(b)(1) applies only when the employer is a motor carrier or motor private carrier, the employee is a driver, driver's helper, loader or mechanic whose duties affect the safety of vehicles in interstate or foreign commerce, and the small vehicle exception does not apply. Under the small vehicle exception, overtime is owed in any workweek in which the employee's safety-affecting work includes vehicles of 10,000 pounds or less, even if the employee also works on heavier vehicles that week.

Dealerships and live-in workers. Fact Sheet #11 (revised November 2018) names service writers, service advisors, service managers and service salesmen among those covered by 13(b)(10)(A), consistent with the Supreme Court's 2018 holding that service advisors are "salesm[e]n . . . primarily engaged in . . . servicing automobiles." For live-in domestic workers, 29 CFR 552.102 says the overtime exemption does not excuse paying minimum wage for all hours worked, though the parties may agree to exclude sleeping time, meal time and other off-duty periods. Fact Sheet #79B defines living in as residing on the premises permanently or for extended periods, such as five days a week (120 hours or more).

Section 7(i): retail and service commissions. Under 29 U.S.C. 207(i), an employee of a retail or service establishment is exempt from overtime in a workweek if the regular rate is more than one and one-half times the applicable federal minimum wage and more than half of the employee's pay for a representative period of at least one month is commissions on goods or services. Fact Sheet #20 says the employer picks the representative period (one month to one year), that an establishment qualifies if at least 75 percent of its annual sales are not for resale and are recognized as retail in the industry, and that tips never count as commissions. Under 29 CFR 779.419, if the regular rate test fails, there is no overtime exemption "in that particular workweek."

Partial exemptions under 7(j) and 7(b). A hospital or residential care establishment may, by agreement with the employee before the work is performed, use a 14-day period instead of the workweek, paying time and one-half for hours over 8 in any workday and over 80 in the 14-day period (29 U.S.C. 207(j)). Switching back and forth to reduce overtime is not permitted (29 CFR 778.601). Section 7(b) gives partial exemptions under certain collective bargaining agreements and for small local petroleum distributors, conditioned on overtime after 12 hours in a day or 56 in a week (29 CFR 778.602).

How exemptions are read today. The Supreme Court said in E.M.D. Sales v. Carrera that "the law places the burden on the employer to show that an exemption applies," and held that the employer must prove it by a preponderance of the evidence, not by clear and convincing evidence. In Encino Motorcars v. Navarro (2018), the Court rejected the principle that FLSA exemptions should be construed narrowly, reasoning that the exemptions "are as much a part of the FLSA's purpose as the overtime-pay requirement," and said they get a fair reading. Some older Department of Labor guidance, including the elaws FLSA Advisor, still says exemptions are narrowly construed; that page also notes they are usually applied workweek by workweek.

Titles, trades and first responders. Every exemption depends on the work actually done and the pay actually received. Under 29 CFR 541.2, a job title alone is insufficient to establish exempt status. Under 29 CFR 541.3, the white-collar exemptions do not apply to blue-collar workers such as carpenters and electricians, or to police officers, firefighters and paramedics, regardless of pay, although another exemption, such as 13(b)(20), may apply.

Example: seasonal amusement receipts test. Fact Sheet #18 describes an establishment open nine months whose six highest-receipt months total $260,000 (an average of $43,333) and whose other six months total $75,000 (an average of $12,500). One-third of $43,333 is about $14,444. Because $12,500 is not more than one-third of the higher average, the 13(a)(3) exemption applies.

Example: a 7(i) week that fails. With the federal minimum wage at $7.25, the 7(i) threshold is a regular rate above $10.875. A furniture store salesperson whose pay over the representative period is mostly commission earns $650 for 50 hours in one week: a regular rate of $13.00, so no overtime is due that week. In another week the employee earns $500 for 50 hours, a regular rate of $10.00. The exemption is lost for that week, and under 29 CFR 778.118 the employee is owed half the regular rate ($5.00) for each of the 10 overtime hours, or $50, for a total of $550.

Example: a 7(b) week. The regulation's own illustration: an employee covered by a 7(b) exemption at $5.20 an hour works 14, 9, 10, 15, 12 and 8 hours, a total of 68. Daily overtime is 5 hours (over 12) and weekly overtime is 12 hours (over 56). The larger number applies, so pay is 12 hours at $7.80 ($93.60) plus 56 hours at $5.20 ($291.20), or $384.80 (29 CFR 778.602).

Recordkeeping for exempt employees. Exempt status reduces but does not end recordkeeping. For 13(a)(1) employees, 29 CFR 516.3 requires the standard payroll data except hours and overtime items, plus the basis of pay in enough detail to calculate total remuneration. For most 13(b) employees, 29 CFR 516.12 still requires hours worked each workday and workweek, since minimum wage applies. For 7(i) employees, 29 CFR 516.16 requires a notation on the payroll identifying them, a copy or summary of the 7(i) agreement including the representative period, and total pay each period with commissions shown separately.

Where states differ. The FLSA sets a floor. Under 29 CFR 541.4, employers must comply with any state or local law setting a higher minimum wage or lower maximum workweek, and Fact Sheet #18 notes that some state wage laws may not recognize the seasonal amusement exemption. As one example, the Washington Department of Labor and Industries agricultural overtime FAQ says dairy workers became eligible for overtime over 40 hours on November 5, 2020, and all other agricultural workers on January 1, 2024, after steps at 55 hours (2022) and 48 hours (2023), even though federal law still exempts agriculture from overtime under 13(b)(12). Check your own state labor department before relying on a federal exemption.

Not the tax "exemption." The word has a different meaning on Form W-4. There, an employee may claim exemption from federal income tax withholding for 2026 only if the employee had no federal income tax liability in 2025 and expects none in 2026. That is a withholding question, unrelated to wage and hour status; see our page on the W-4 form.

FAQ: Does an overtime-only exemption allow paying below minimum wage? No. Section 13(b) removes only the overtime section, and 29 CFR 552.102 makes the point expressly for live-in domestic workers.

FAQ: Can a salaried employee be non-exempt? Yes. Salary is not itself an exemption; see salaried non-exempt.

FAQ: What if an exemption is claimed but does not apply? Under 29 U.S.C. 216(b), an employer that violates the minimum wage or overtime sections is liable for the unpaid wages or overtime and an additional equal amount as liquidated damages. Overtime is then computed on all hours worked.

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