Exempt vs. Non-Exempt Employee Status

It’s a continuous HR challenge; to decide which of your employees are exempt or non-exempt from overtime requirements according to the FLSA (Fair Labor Standards Act) .  The burden of supporting the actual application of an exemption is up to the employers, and if overlooked, can result in costly lawsuits and fines.

Employees whose jobs are governed by the FLSA are either “exempt” or “nonexempt.” Nonexempt employees are entitled to overtime pay. Exempt employees are not. In presuming an employee is not exempt from overtime, there are many instances in which overtime may not be paid properly, including when an employee is not paid for travel time between job sites, activities before their shift starts or after it ends, and activities to prepare for work that are central to work activities. If an employee is entitled to overtime they must be paid one and a half times the employee’s “regular rate of pay” for all hours worked over 40 in the same work week.

To determine if an employee is truly exempt, they need to first pass a salary basis requirement test.  The FLSA has deemed this requirement as:

“To qualify for exemption, employees generally must be paid at not less than $455 per week on a salary basis. These salary requirements do not apply to outside sales employees, teachers, and employees practicing law or medicine. Exempt computer employees may be paid at least $455 on a salary basis or on an hourly basis at a rate not less than $27.63 an hour.”

After the salary test has been satisfied, the employee must qualify into a category to be considered exempt.  Those categories are: executive, professional, administrative, computer, and outside sales.  If an employee is not found to be in one of these five categories, they should not be classified as exempt employees, and be eligible for the overtime rule according to the FLSA.

Fact sheets with details regarding these positions can be found at: http://www.dol.gov/whd/regs/compliance/fairpay/fs17a_overview.htm

The government has come out with guidelines and even “quizzes and tests” to determine which employees are exempt and non-exempt.  These guidelines are not job description specific, and can get confusing when considering specific positions.

One such test to determine eligibility can be found here:

http://www.nibm.net/content/Audit.TestYourCompliance.pdf

For further information, please contact a representative at Solution Services.  You can also contact the DOL at:

 http://www.wagehour.dol.gov and/or call our toll-free information and helpline, available 8 a.m. to 5 p.m. in your time zone, 1-866-4USWAGE (1-866-487-9243).

When the state laws differ from the federal FLSA, an employer must comply with the standard most protective to employees.  Links to your state labor department can be found at www.dol.gov/whd/contacts/state_of.htm.