What are Exempt versus Non-Exempt Employees?

This designation concerns employee wage overtime entitlements under the Fair Labor Standards Act. An exempt employee does not qualify for overtime wage protections.

How does exempt employee status affect wages?

The difference between the two types of employee regards the entitlement overtime pay after the employee has worked a total of 40 hours in a single fiscal week.

The exempt employee is generally as salaried, full-time employee who earns $26,300 per year (or $455 weekly) is not entitled to overtime pay for weeks in which she works more than 40 hours.

There are also some jobs that are classified as exempt by definition. For example, “outside sales” roles are exempt from the overtime law, while inside sales roles are not.

With few exceptions, to be exempt an employee must:

• (a) be paid at least $23,600 per year ($455 per week), and
• (b) be paid on a salary basis, and also
• (c) perform exempt job duties.

These requirements are outlined in the FLSA Regulations (promulgated by the U.S. Department of Labor).

Most employees must meet all three “tests” to be exempt.

A salaried employee is one who has a guaranteed minimum amount of money for a fixed period of work. This is known as the salary basis.

Generally, a salaried employee receives an annual compensation divided by the number of days they are expected to work.

If an employee receives less salary if she works fewer hours in a week, then she is an hourly employee.

The salary basis pay requirement for exempt status does not apply to certain jobs, such as doctors, lawyers, and school teachers.

Finally, the employee must also perform exempt job duties.

This usually consists of relatively high-level work.

There are three typical categories of exempt job duties, called “executive,” “professional,” and “administrative.”

What are Exempt Executive Job Duties? 

Exempt executive job duties include 1. Supervising two or more other employees, 2. Having primarily managerial duties, and 3. Has influence over the job status of others.

What are Exempt Professional Job Duties?

Exempt professional job duties include include the traditional “learned professions, such as lawyers, accountants (not bookkeepers), doctors, dentists, teachers, architects, engineers, registered nurses (not LPNs), actuaries, scientists, pharmacists, and clergy.

What are Exempt Administrative Job Duties?

Exempt Administrative job duties include (a) office or nonmanual work, which is (b) directly related to management or general business operations of the employer or the employer’s customers, and (c) a primary component of which involves the exercise of independent judgment and discretion about (d) matters of significance.

This designation is for skilled professionals who “keep the business running.”

These are not lower-level “operational” or “production” employees.

Administrative employees are staff members that provide “support” to the operational or production employees.

Examples of administrative employees include individuals in human resources, payroll and finance (or other accounting and tax functions), marketing and advertising, quality control, public relations, legal and regulatory compliance, and some computer-related or technology jobs.

What are the Rights of Non- Exempt Employees? 

A non-exempt employee qualifies to receive overtime pay (1 and 1/2 times the base hourly rate) for each hour worked over 40 hours during a specified FLSA work period.