What's the difference between an exempt and non-exempt employee?
The primary difference in status between exempt and non-exempt employees is their eligibility for overtime. Under federal law, that status is determined by the Fair Labor Standards Act (FLSA). Exempt employees are not entitled to overtime, while non-exempt employees are. In order to qualify as exempt, certain criteria must be met. To determine if your employees should be classified as exempt or non-exempt, you can often perform an assessment based on multiple factors including:
How much money they earn
The type of work they do
Their specific responsibilities and job duties
State laws may also have different criteria for classification, which also must be followed. For example, California has additional requirements in order to qualify as exempt, which you can learn about here.
Under federal law, non-exempt employees must be paid minimum wage plus overtime pay if they work more than 40 hours in a workweek. Overtime must be paid at 1.5 times the regular pay rate. You will also need to consult the state labor laws in the state where the employee is working for additional requirements. Employees are considered non-exempt unless they qualify for an exemption under federal and/or state law.
Exempt employees are not covered by the Fair Labor Standards Act, and are, therefore, not entitled by law to overtime pay. Most employees classified as exempt work in upper-level positions within their organization, such as executive, professional, or administrative positions. Other occupations are classified by definition as exempt, such as outside sales. Exempt status is considered advantageous to employers because it doesn't limit the hours that an employee can work in a given pay period for the salary earned. Exempt employees often work more than the standard 40-hour week. However, it is important to remember that the job must meet the requirements of the exemption; employers may not override the exemption requirement just because they do not want to pay overtime.
The Department of Labor (DOL) FLSA Overtime Security Advisor helps employers and employees understand their rights and responsibilities under federal overtime laws.