Exempt versus nonexempt employees and the FLSA

The Fair Labor Standards Act (FLSA) covers several elements, including positions that are considered exempt vs. non-exempt positions. The FLSA is a federal law that all states must comply with and continue to comply with.

First, a couple of definitions:

Exempt employee– Employees who are salaried and are not eligible for overtime pay.

Non-exempt employee– Employees who work hourly and are eligible to receive overtime pay.

So how does a company determine if a position is considered exempt or non-exempt? The FLSA defines and determines what types of positions are eligible for what type of work through an assessment of salary level, salary base, and job obligations. First, employees may or may not be covered based on the number of employees in the company, the amount of business the company conducts per year, and the type of position the employee holds. Additionally, to be covered by the FSLA, there must be an employer-employee agreement; hired employees are not covered.

There are five main classifications that would qualify an employee to be exempt: executive, administrative, professional, outside sales, and in some cases, computer employees. This post will focus on job duties, as the title alone does not qualify an employee as exempt. However, in all cases, to be exempt, the employee must receive a minimum wage of $ 455 per week. It’s also worth noting that highly-paid employees who receive $ 100,000 in annual compensation and meet proof-of-work requirements are exempt from the FLSA.

Specific job duty tests must be completed and met to qualify the employee with one of the above job titles as exempt. This testing information comes directly from the FLSA.

Executive exemption

Fact Sheet No. FLSA 17B requires the following criteria to be met to determine executive exemption status:

• The employee must be compensated based on a salary (as defined in the regulations) at a rate of not less than $ 455 per week;
• The primary duty of the employee should be to manage the business or manage a customarily recognized department or subdivision of the business;
• The employee must regularly and regularly direct the work of at least two or more full-time employees or their equivalent; and
• The employee must have the authority to hire or fire other employees, or the employee’s suggestions and recommendations regarding the hiring, firing, promotion, promotion, or any other change in status of other employees should be of particular importance.

Administrative exemption

Fact Sheet No. 17C of the FLSA requires the following criteria to be met to determine administrative exemption status:

• The employee must be compensated on the basis of salary or fees (as defined in the regulations) at a rate of not less than $ 455 per week;
• The primary duty of the employee should be the performance of clerical or non-manual work directly related to the administration or general business operations of the employer or the employer’s clients; and
• The primary duty of the employee includes the exercise of discretion and independent judgment regarding important matters.

Professional exemption

Fact Sheet No. FLSA 17D requires the following criteria to be met to determine professional exemption status:

• The employee must be compensated on the basis of salary or fees (as defined in the regulations) at a rate of not less than $ 455 per week;
• The primary duty of the employee should be the performance of work that requires advanced knowledge, defined as work that is predominantly intellectual in nature and includes work that requires the constant exercise of discretion and judgment;
• Advanced knowledge must be in a science or learning field; and
• Advanced knowledge should usually be acquired through an extended course of specialized intellectual instruction.

Outside sales exemption

Fact Sheet No. FLSA 17F requires the following criteria to be met to determine outside sales exemption status:

• The primary duty of the employee must be to make sales (as defined in the FLSA) or to obtain orders or contracts for services or for the use of facilities for which the customer or customer will pay consideration; and
• The employee must be hired habitually and regularly away from the employer’s workplace (s).

Computer related occupancy exemption

Fact Sheet No. FLSA 17E requires the following criteria to be met to determine computer-related occupancy exemption status:

• The employee must be compensated either on the basis of a salary or rate at a rate of not less than $ 455 per week or, if compensated by the hour, at a rate of not less than $ 27.63 per hour;
• The employee must be employed as a computer systems analyst, computer programmer, software engineer, or other worker with similar skills in the field of computer science who performs the tasks described below;
• The main duty of the employee should consist of:

  • 1) The application of systems analysis techniques and procedures, including consultation with users, to determine the functional specifications of the hardware, software or system;
  • 2) The design, development, documentation, analysis, creation, testing or modification of computer systems or programs, including prototypes, based on and related to the user or system design specifications;
  • 3) The design, documentation, testing, creation or modification of computer programs related to the operating systems of the machines; gold
  • 4) A combination of the aforementioned functions, the performance of which requires the same level of skills.

When determining whether or not an employee is exempt, be sure to refer to these tests so that your business is fully compliant with the FLSA laws. Keep in mind that state laws also affect how employees are classified. When determining the proper classification for your employees, be sure to check state laws as well. The law that most protects the employee is the law that must be followed. Additional information on exemption vs. Non-exempt employees can be found on the Wage and Hour Division site.