Demystifying the Law: Exempt & Non-Exempt Employees

Posted March 31, 2011 in Labor and Employment by

If you visit the employment law forums, you know that the issue of exempt vs. non-exempt employees is a popular one. And even if you’re not a regular forum participant, it’s a topic that everyone who’s employed should understand. This blog will demystify exempt and non-exempt employees.

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The Fair Labor Standards Act (FLSA) requires that most employees in the United States be paid at least the federal minimum wage for all hours worked. Additionally, employees must receive overtime pay at time and one-half the regular rate of pay for all hours worked over 40 hours in a workweek. However, under the FLSA certain "white collar" workers are exempt from both minimum wage and overtime pay.

When we refer to exempt workers, we’re talking about workers who are exempt from these FLSA rules. A non-exempt worker is someone who’s subject to minimum wage and overtime laws.

Exempt Employees

To qualify as an exempt employee, the person must meet certain tests regarding their job duties and be paid a salary of at least $455 a week. You can’t determine whether someone’s exempt or non-exempt based on job title alone.

Types of white collar employees who may be exempt from minimum wage and overtime requirements include:

  • Executives
  • Administrators
  • Professionals
  • Computer employees
  • Outside salespersons
  • Highly compensated employees

The exemption test varies for each category of employees. So, for example, an administrator will have to meet different requirements than an outside salesperson. An administrator is an exempt employee if all of the following are true:

  • The employee earns a salary of at least $455 per week or $23,660 annually
  • The employee’s primary duty must be the performance of office or non-manual work directly related to the management policies or general business operations of the employer or its customers
  • The employee’s primary duty includes the exercise of discretion and independent judgment with respect to significant matters

A computer employee, on the other hand, is exempt if:

  • The computer employee earns at least $23.63 per hour or $455 per week and is employed as a computer systems analyst, computer programmer, software engineer or as a similarly skilled worker in the computer field
  • The employee has a primary duty in either application of systems analysis techniques and procedures; or design, development, documentation, analysis, testing, creation or modification of computer systems or programs; or design, documentation, testing, creation or modification of computer programs related to machine operating systems; or a combination of these duties that requires the same level of skill to perform those duties

Some categories of employees are exempt only from overtime pay requirements, but not from minimum wage requirements. These include:

  • Certain commissioned employees of retail or service establishments
  • Auto, truck, trailer, farm implement, boat or aircraft salespersons employed by non-manufacturing establishments primarily engaged in selling
  • Domestic service workers who reside in their employers’ residences
  • Employees of motion picture theaters

Non-Exempt Employees

If you are a worker who earns less than $23,660 annually, you automatically are a non-exempt employee, regardless of the type of work you do. In addition, manual laborers, police officers, firefighters, paramedics and other similar public safety personnel are also non-exempt.

If you work in a white collar job in one of the categories listed above, but don’t meet all of the tests required to be labeled as an exempt employee, then you are also non-exempt.

If you work in a blue collar job, you are a non-exempt employee.

As a non-exempt employee, your employer must pay you minimum wage and overtime when you work more than 40 hours a week (or, in some cases, more than 8 hours a day). There can be severe penalties for employers who misclassify employees to get around paying overtime or other benefits.

If you think you should be a non-exempt employee but have been categorized as an exempt worker, you should contact an employment lawyer.

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