What’s the Difference Between an Exempt and Non-Exempt Employee? A Guide

The primary difference in status between exempt and non-exempt employees is their eligibility for overtime.

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Guide to Exempt Vs. Non-Exempt Employees

Need to quickly determine how to classify a new employee? Here is a guide to help you decide.

  •  What is an Exempt Employee? An individual who is exempt from the overtime provisions of the Fair Labor Standards Act (FLSA) because he or she is classified as an executive, professional, administrative or outside sales employee, and meets the specific criteria for the exemption.
  • What is a Non-Exempt Employee? An employee who is not covered by FMLA and is therefore not entitled to overtime pay.

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.

Non-Exempt Employees:

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:

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 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.

Helpful Links:

The Department of Labor (DOL) FLSA Overtime Security Advisor helps employers and employees understand their rights and responsibilities under federal overtime laws.

Overtime Laws, US Department of Labor – DOL.gov

 

Do I have to pay part-time employees overtime?

Per the Department of Labor, your covered, nonexempt employees requires overtime pay (PDF) to be at least one and one-half times an employee’s regular rate of pay after 40 hours of work in a workweek. Some exceptions apply under special circumstances to police and firefighters and to employees of hospitals and nursing homes.

Some states have overtime laws. In cases where an employee is subject to both the state and federal overtime laws, the employee is entitled to overtime according to the higher standard (i.e., the standard that will provide the higher overtime pay). Extra pay for working weekends or nights is a matter of agreement between the employer and the employee (or the employee’s representative).

The Contract Work Hours and Safety Standards Act (CWHSSA) requires contractors and subcontractors on most federal contracts over $100,000 for services or construction to pay laborers and mechanics at least one and one-half times their basic rate of pay for all hours worked over 40 in a workweek. CWHSSA also applies to most federally assisted construction contracts.

Do I have to pay Exempt Employees Overtime?

Per the DOL, here are the typical circumstances for overtime pay for exempt employees.

Exemptions

Some employees are exempt from the overtime pay provisions or both the minimum wage and overtime pay provisions. Because exemptions are generally narrowly defined under the FLSA, an employer should carefully check the exact terms and conditions for each.

Exemptions from Both Minimum Wage and Overtime Pay

  1. Executive, administrative, and professional employees (including teachers and academic administrative personnel in elementary and secondary schools), outside sales employees, and employees in certain computer-related occupations (as defined in DOL regulations);
  2. Employees of certain seasonal amusement or recreational establishments, employees of certain small newspapers, seamen employed on foreign vessels, employees engaged in fishing operations, and employees engaged in newspaper delivery;
  3. Farmworkers employed by anyone who used no more than 500 “man-days” of farm labor in any calendar quarter of the preceding calendar year;
  4. Casual babysitters and persons employed as companions to the elderly or infirm.

Exemptions from Overtime Pay Only

  1. Certain commissioned employees of retail or service establishments; auto, truck, trailer, farm implement, boat, or aircraft sales-workers; or parts-clerks and mechanics servicing autos, trucks, or farm implements, who are employed by non-manufacturing establishments primarily engaged in selling these items to ultimate purchasers;
  2. Employees of railroads and air carriers, taxi drivers, certain employees of motor carriers, seamen on American vessels, and local delivery employees paid on approved trip rate plans;
  3. Announcers, news editors, and chief engineers of certain non-metropolitan broadcasting stations;
  4. Domestic service workers living in the employer’s residence;
  5. Employees of motion picture theaters; and
  6. Farmworkers.

Partial Exemptions from Overtime Pay

  1. Partial overtime pay exemptions apply to employees engaged in certain operations on agricultural commodities and to employees of certain bulk petroleum distributors.
  2. Hospitals and residential care establishments may adopt, by agreement with their employees, a 14-day work period instead of the usual 7-day workweek if the employees are paid at least time and one-half their regular rates for hours worked over 8 in a day or 80 in a 14-day work period, whichever is the greater number of overtime hours.
  3. Employees who lack a high school diploma, or who have not attained the educational level of the 8th grade, can be required to spend up to 10 hours in a workweek engaged in remedial reading or training in other basic skills without receiving time and one-half overtime pay for these hours. However, the employees must receive their normal wages for hours spent in such training and the training must not be job specific.
  4. Public agency fire departments and police departments may establish a work period ranging from 7 to 28 days in which overtime need only be paid after a specified number of hours in each work period.
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