FLSA Non-Exempt: Everything You Need to Know
The Fair Labor Standards Act (FLSA) does not extend to all jobs. FSLA nonexempt employees are categorized as such due to their overtime pay entitlement. 8 min read
What Is FLSA Non-Exempt?
FSLA non-exempt employees are categorized as such due to their overtime pay entitlement The Fair Labor Standards Act (FLSA) does not extend to all jobs. Certain positions, depending on the statute, are excluded from FLSA coverage. Others might be governed by the FLSA, but they are categorized as "exempt" from overtime rules.
Essentially, most jobs in the United States are governed by the FLSA, but a few of them are not.
Certain jobs aren't included in FLSA coverage at all according to the act's overtime rules. In general, there are two types of total exclusions:
- Exclusion from the FLSA statute, such as agricultural workers and movie theater jobs.
- Exclusion based on another federal labor law, such as truck drivers and railroad workers.
Essentially, if a job falls under a different federal labor law, the FLSA doesn't apply. For example, railroad positions are regulated by the Railway Labor Act and not the FLSA, while most truckers would fall under the Motor Carriers Act.
Exempt or Non-Exempt
Employees who work in positions that are regulated by the FLSA are considered either "non-exempt" or "exempt" based on their job.
Non-exempt employees are categorized as such because they are entitled to overtime pay. By contrast, exempt employees do not have a right to overtime pay. The majority of workers regulated by the FLSA are considered non-exempt, although some are not.
By definition, some positions are classified as exempt due to the very nature of the job duties. Outside sales is just one example because these employees typically work on commission and not on the clock as those in inside sales.
Whether an employee is exempt or non-exempt is contingent upon three factors:
- how much they make
- how they get paid
- the type of work they do
With some exceptions, an employee can be considered exempt if he or she is:
- paid at least $455 per week ($23,600 per year)
- paid on a salary basis
- responsible for performing exempt job duties
The FLSA requires employers to not only pay at least the minimum wage, but to also pay overtime pay to employees who work more than 40 hours during a single workweek. The only way employers can get around this rule is if they meet certain exceptions.
What's more, most states have individual wage and hour laws that may have additional requirements not outlined by the FLSA.
Employers must ensure they operate according to both federal and state wage and hours laws. Failing to do so can result in legal issues.
Salary Level Test
The salary level test is often used to determine if an employee is exempt or non-exempt. Employees earning less than a salary of $23,600 per year are non-exempt. Those earning more than six figures annually are almost always exempt.
Salary Basis Test
In general, employees earn money on a salary basis if they have an assured amount of money they receive during any given workweek.
The salary doesn't have to include the entirety of compensation, but there must be some amount the employee can rest assured he or she will be receiving a check for the work performed each week.
There are what would be considered "rules of thumb" to help indicate that a worker is paid on a salary basis. For example, if the employee's base pay is calculated from an annual salary figure divided by the number of days during which paychecks are issued, that employee earns a salary.
The FLSA salary basis test only applies to monetary amount reductions.
It is not considered a reduction of pay if an employee is charged for any work absences or leave. This is because the employee's paycheck stays the same.
Along those same lines, paying a worker more isn't conflicting with salary basis status because there is no base-pay reduction.
A salary basis employee's base pay cannot be reduced based on the amount of or quality of work he or she performs, so long as the employee completes some work during the work period.
The employee's base pay also cannot be reduced if there is no work available to perform, such as a manufacturing facility closing due to a slow production period.
Employers are allowed to dock a salary basis employee's base pay in daily increments for personal leave, disciplinary suspensions, or for sick leave.
There can also be "impermissible" and "permissible" salary basis pay reductions:
- Impermissible reductions can sometimes affect the exempt status in that the employee may no longer be paid on a salary premise, and would, therefore, be considered non-exempt.
- Permissible reductions do not affect the employee's exempt status.
Employers have several ways to fix unallowed reductions in an employee's salary basis pay. Although it is rare, an exempt worker can become non-exempt due to other problems with salary basis pay.
An exempt status' salary basis pay requirement doesn't apply to certain careers, such as teachers, doctors, and lawyers, even if these professionals are paid per hour.
Exempt Job Duties for Executives
Executive job duties are considered to be exempt if the employee is in charge of supervising more than two other workers. This person must also have management duties as the primary responsibility in the job description. The executive must provide real input into other employees' job statuses. As such, they have a great deal of weight in making decisions related to promotions, hiring, firing, and job assignments.
Supervising must be a regular part of an executive employee's job. Supervising nonemployees, such as temporary contract-based workers, is not considered to meet the standard for exemption.
The requirement can be met by supervising at least two full-time workers or an equal number of part-time workers.
Simply supervising is not enough, as the executive employee must be a manager as the main job duty.
FLSA regulations include a list of the expected types of management obligations. These include:
- conducting interviews
- hiring and training new employees
- setting pay rates and the amount of hours worked
- managing sales or production records
- assessing productivity among employees and the business
- dealing with employee complaints and other grievances
- disciplining employees
- deciding on new work techniques
- planning the kinds of work that should be done daily or on a project-by-project basis
- distributing work duties among employees based on their skills, job duties, and talents
- figuring out which kinds of equipment should be used on a job or what kinds of materials are needed
- outlining and planning work budgets
- ensuring all work meets regulatory compliance
- provide a safe, secure workplace
A good rule of thumb is to decide if the employee in question would be considered in charge of a department or shift.
The worker may qualify as exhibiting executive job duties even if he or she also performs non-managerial tasks. For instance, a manager at a fast food restaurant may spend time serving customers and helping make food, but they are still the manager.
The last demand that meets the exemption for executives is for workers to have some kind of input on matters related to personnel. An executive exempt employee doesn't need to make any final decisions on these matters, but it's the input that counts.
Job duties associated with what are traditionally known as "learned professions," or those requiring a higher education, are almost always exempt.
These professionally exempt workers include doctors, teachers, lawyers, dentists, clergy, architects, registered nurses, accountants, engineers holding engineering degrees and performing the work of licensed engineers, scientists, actuaries, pharmacists, and others whose careers require them to have "advanced knowledge" in the field.
Professionally exempt duties would be any type of work that is largely intellectual in nature, involves exercising judgment and discretion, and requires specialized education.
Professionally exempt employees must have more than a high school education, and typically an education beyond college (such as graduate school), in fields that are considered more academic than skilled or mechanical.
Advanced degrees are the most common indicator of a professionally exempt employee, but these are not necessary as long as the employee has some kind of advanced education through other means.
There are also employees who may perform "creative professional" job duties and would be considered exempt. These creative professional classifications would include:
Exempt Administrative Job Duties
One of the most difficult exempt job duties to define is the administrative type.
By definition, administrative job duties that are considered exempt include nonmanual or office work, either of which is related to management or business operations in some way.
The administrative exemption is reserved for high-level employees whose main duty is to keep the business running. Administrative employees essentially support operations or employees, so they are considered staff rather than "line" workers.
Administrative activities include:
- Personnel and labor relations and personnel (human resources employees)
- Finance and payroll (budget management)
- Records maintenance
- Accounting and tax
- Marketing and advertising
- Quality control
- Public relations
- Legal and regulatory compliance
- Computer-related administrative jobs
For an employee to be considered exempt under this administrative exemption, any work performed must be considered office or nonmanual work. Clerical employees who perform office or nonmanual work are considered support staff and, as such, are not administratively exempt.
Unlike support work, administratively exempt duties involve more judgment and discretion. These employees are in a position of authority to make decisions on matters that can affect the business.
One can determine whether a position falls under an administrative exemption by seeing whether:
- the employee has any authority to interpret or formulate company policy
- the employee's job duties relate to overall business operations (for instance, one can consider the difference between buying office supplies versus buying a fleet of commercial vehicles)
- whether or not the employee has any authority that can make a financial impact on the company
- whether or not the worker has any authority to veer from policy without approval from another worker
There are many nonmanual office jobs that are not considered administrative. For example, filing, completing forms, preparing reports, answering the phone, planning travel itineraries, running customer service desks, and other positions are not high-level enough to be considered administratively exempt.
To count as an administratively exempt position, job duties must include the exercise of judgment and discretion regarding matters of considerable importance to the business as a whole. By this definition, certain secretaries may be considered high-level, such as the personal assistant to a CEO, while others may only have the word "administrative" in the title, such as an administrative assistant, but they don't actually perform any non-exempt office duties.
Exempt Employee Rights
Exempt employees essentially have no rights under FLSA rules relating to overtime.
If an employee is exempt, they are entitled to receive their full base salary during any given work period when work was performed, minus any permissible deductions.
There is nothing listed in the FLSA that keeps a company from requiring its exempt employees to clock in, work a certain schedule, or even to make up any lost time.
The FLSA also does not limit the amount of work time an employer can require employees to meet during their schedule.
Exemptions are often loosely interpreted, and as a supervisor, it's your job to bear the burden of proof when it comes to classifying an employee as exempt.
Non-Exempt Employee Rights
Under the FLSA, non-exempt employees are entitled to time and one-half their regular pay rate for each hour worked over the overtime threshold during an FLSA-approved work stretch.
The main problem most employers encounter with non-exempt workers is miscalculating how much overtime pay these employees are owed.
New Overtime Regulations Stalled
In 2016, the Department of Labor (DOL) attempted to update overtime regulations to expand the salary threshold for exemption. However, one week before the final regulations' effective date, the U.S. District Court for the Eastern District of Texas passed an emergency motion that prevented the DOL from enforcing the new overtime rule on a country-wide scale. Because of this, the salary threshold continues to remain as it has been since 2004.
While there are exceptions from FLSA rules, it is typically illegal to give non-exempt employees time off (or comp time) instead of paying them overtime.
Wage and Hour Law Enforcement
FLSA provisions are interpreted and enforced by the U.S. Department of Labor (DOL), which investigates complaints and also pursues legal action when violations are discovered.
Most states also have agencies to investigate complaints and enforce state labor laws.
If you need help with FLSA non-exempt status, you can post your legal need on UpCounsel’s marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Stripe, and Twilio.