The Fair Labor Standards Act (FLSA) requires that all employees be paid at least minimum wage for all hours worked as well as pay of at least one and one half times their regular rate of pay for all overtime hours worked over 40 hours in a workweek. Employees who are classified as exempt are not subject to these minimum wage or overtime requirements.
In order to be classified as exempt, the employee must be paid on a salary basis of at least $455 per week (Update: As of January 1, 2020 the new minimum weekly salary for exempt employees is $684). In addition, the employee’s work must meet certain duties tests as established by the Department of Labor (DOL). You can read more about this here.