Exempt vs Non Exempt: Everything You Need to Know
The Fair Labor Standards Act requires that employers classify their employees as exempt or nonexempt. Such classification will depend on salary of the employee.3 min read
Exempt vs. Nonexempt Employee
The Fair Labor Standards Act requires that employers classify their employees as exempt or nonexempt. Such classification will depend on the job duties and salary of the employee. Under the FLSA, nonexempt employees are entitled to receive overtime pay when they work more than 40 hours in a work week. Overtime pay is defined as one-and-a-half times the regular rate of pay.
Usually, a nonexempt employee receives hourly pay while an exempt employee receives a salary. However, in some cases, employers pay nonexempt employees on a salary basis. These employers pay these nonexempt employees additional income for all overtime work. On the other hand, an exempt employee is not entitled to receive pay for overtime work under FLSA overtime rules.
White-collar positions are the most common types of exemptions under the FLSA overtime rules. Professional, administrative, and executive employees are usually exempted. Outside sales employees and computer professionals are also exempted. Exempt employees do not enjoy any protections under FLSA.
To be considered an exempt employee an individual needs to meet these requirements:
- The individual must receive at least $23,600 in pay every year. This translates to $455 per week.
- The individual must be paid on a salary basis versus on an hourly basis.
- The individual must perform job duties that are considered exempt under the FLSA overtime rules.
If an employee is executively exempt, his job duties usually involve the following:
- Supervising at least two other employees within the corporation.
- Management of key aspects of the business.
- Impacting the job status of various employees within the organization.
In general, if an employee is considered a boss or manager, he is executively exempt under the FLSA overtime rules.
If an employee is professionally exempt, his job duties usually:
- Require specialized education, usually past the high school level.
- Require the use of judgment in discretion on a regular basis.
Some examples of professionally exempt employees are lawyers, registered nurses, physicians, teachers, and architects. In general, if a job requires specialized education, the job is probably considered professionally exempt under the FLSA overtime rules. Creative professionals are also considered professionally exempt. Actors, writers, journalists, and musicians are some examples of creative professionals.
An employee who is administratively exempt is responsible for supporting the business. The job could be public relations, accounting, payroll, or human resources. According to the FLSA, administratively exempt duties are:
- Non-manual or office work.
- Related directly to general business operations or management.
- The main component involves using discretion and judgment when it comes to important matters.
Miscategorized Exempt and Nonexempt Employee
If an employee is miscategorized, he must attempt to resolve the issue by going to his employer directly. In many cases, the miscategorization is an honest mistake. However, in some cases, employers intentionally violate the rights of the employee. Such employees should reach out to a local employment law attorney.
Proposed Federal Overtime Rule
In November 2016, a Texas federal judge issued an injunction in regard to the Overtime Final Rule that was supposed to go into effect in December 2016. Under the Overtime Final Rule, the exempt salary threshold would increase from $23,600 to $47,476 per year.
Based on the growth of wages, the salary threshold for exempt employees is scheduled to be reviewed every three years. The first review will take place in January 2020. The injunction is still ongoing. Some of the issues surrounding the injunction include comp time, breaks, and child labor.
What is an Exempt Employee?
Employers do not have to pay their exempt employees overtime pay for overtime work, as far as the FLSA is concerned. Overtime work is defined as working over 40 hours in a single work week. In contrast, nonexempt employees are entitled to receive overtime pay for all the overtime work that they perform.
Sometimes, employers purposely or accidentally treat their nonexempt employees as if they were exempt. For example, employers might fail to properly record all the overtime hours of nonexempt employees. In some cases, nonexempt employees are simply not compensated properly, even though the overtime hours are properly recorded. Nonexempt employees can file overtime claims under the FLSA with the U.S. Department of Labor.
If you would like to learn more about exempt vs. nonexempt status, visit UpCounsel's marketplace to talk with a lawyer who specializes in employment law. UpCounsel's attorneys have graduated from Harvard Law, Yale Law, and other elite institutions.