Exempt Employee: Everything You Need to Know
An exempt employee differs from a nonexempt employee in pay for overtime hours.3 min read
An exempt employee differs from a nonexempt employee in pay for overtime hours. An "exempt employee" does not get paid for overtime but regulations do exist which govern whether an employee could be exempt from receiving overtime pay. These can depend on:
- How much their salary is
- Method of payment
- The kind of work they do
Regulations Regarding an Exempt Employee
The Fair Labor Standards Act (FLSA) guarantees that an exempt employee is not entitled to overtime pay. Many states have their own their own wage and hourly rate laws which add to the requirements of the FLSA. To remain compliant, companies need to follow both state and federal regulations.
To qualify as an exempt employee, one must perform executive, administrative, or professional duties; and be paid an annual salary. An exempt employee is also expected to work the hours that are necessary to carry out the goals and deliverables of their job and to have more flexibility in their schedules to come and go as necessary to carry out work than nonexempt or hourly employees.
Regulations Regarding a nonexempt Employee
As per the Fair Labor Standards Act (FLSA), you must pay a nonexempt employee the federal minimum wage ($7.25 in 2017) for regular hours, and pay equal to time and a half of their regular hourly rate of pay when they work more than 40 hours in any pay week.
Guidelines for Exempt Employees
There are three main categories of exempt employees as recognized by the FLSA:
These categories are broad to cover many types of jobs. However, it is not the job title but the duties the job entails that determine the status of an employee.
Exempt Executive Positions
Job duties of exempt executive jobs typically include:
- Regularly supervising two or more other employees
- Managing as the primary duty of the position
- Some input into the job status of other employees, such as hiring, firing, promotions, or assignments
Exempt Professional Positions
A professional exempt employee could be a:
- Registered nurse
Or any other type of employee whose work requires advanced knowledge. The work of this type of exempt employee is intellectual, requires specialized education, and involves the exercise of discretion and judgment.
Exempt Administrative Positions
The job duties of an exempt administrative position typically include:
- Office or non-manual work which relates to business operations
- The authority to make independent decisions on matters which affect the business as a whole or a significant part of it
Such an exempt employee helps to keep the business running and provides support to other employees whose jobs are operational or productive in nature.
Additional Exempt Employee Positions
Other employees, such as salespeople and those working in the fields of science, technology, engineering, and math can also be classified as exempt, if, as well as being paid a salary, they earn at least $455 a week. Some exceptions to this pay rate include researchers or those working under an educational or governmental grant.
An employer must give the same amount of pay to an exempt employee every pay period, regardless of how many hours they work. This means that even if an exempt employee leaves work early a few times over the course of a pay period, that employee is still entitled to their full salary. If an exempt employee is consistently working less than the usually expected 40 hours per week, a manager can take other actions such as firing that person but must pay the full salary owed to the employee the full salary under all circumstances.
Companies are often not aware of the many rules and regulations of exemption status.
Exclusions from Coverage by Federal Regulations
The FLSA excludes certain jobs from being covered by its overtime rules. These include employees of movie theaters, agricultural workers, and jobs which some other specific federal labor law governs. The FLSA does not apply to those jobs which another federal labor law governs.
Managers are not able to make a nonexempt employee an exempt employee to ease salary calculations, even if the employee agrees to it.
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