What’s the Difference Between Exempt Vs. Nonexempt Jobs? A Guide

Are you wondering whether or not an employee is eligible for overtime? It’s essential to understand that your employees aren’t exempt or nonexempt. The job they perform is. This article will help you get it right.

What’s the Difference Between Exempt Vs. Nonexempt Employees? A Guide

Here's what you need to know about what’s the difference between exempt vs. nonexempt jobs? A guide:

  • The DOL raised the minimum weekly compensation for lower-paid exempt workers effective Jan. 1, 2020, making more people eligible for overtime.
  • The Wage and Hour Division (WHD) under the U.S. Department of Labor (DOL) sets federal laws on overtime via the Fair Labor Standards Act (FLSA).
  • Regardless of employees’ exemption status, all employers must pay eligible workers at least the federal minimum wage.

Are you wondering whether or not an employee is eligible for overtime? It’s essential to understand that your employees aren’t exempt or nonexempt. The job they perform is. Here’s a guide to help you determine which positions are exempt or nonexempt.

The primary differences in status between exempt and nonexempt jobs are whether they’re:

  • Paid a salary
  • Paid by the hour
  • Eligible for overtime compensation

The Wage and Hour Division (WHD) under the U.S. Department of Labor (DOL) sets federal laws on overtime.

You can determine if your employees should be classified as exempt or nonexempt by performing a position assessment based on multiple factors, including:

  • How much money they can earn.
  • The type of work they do.
  • Their specific responsibilities and job duties

The federal Fair Labor Standards Act (FLSA) determines which jobs are eligible for overtime pay. Regardless of employees’ exemption status, all employers must pay eligible workers at least the federal minimum wage, which currently is $7.25 an hour.

Since several states have a specific minimum wage, you must comply with that rate. It is particular to the state, municipality, or local jurisdictions where your employees work to ensure you comply with all the applicable laws.

What jobs are exempt?

FLSA provisions generally exempt positions from receiving overtime pay. Those job duties are classified into the following categories (links for the various exemption tests have been provided):

Employees in these positions are considered white-collar workers.

The DOL raised the minimum weekly compensation for lower-paid exempt workers effective Jan. 1, 2020, making more people eligible for overtime.

Exempt wage rates

Workers in exempt jobs generally receive a salary rather than hourly pay.

Simply paying a job this rate doesn’t automatically exempt it from overtime eligibility. It still must pass the job duties/independent judgment tests.

To be exempt from overtime, employees must receive a wage rate of no less than $684 a week ($35,568 a year) or $27.63 an hour, such as in the case of computer-exempt workers. (Compensation for outside sales workers may differ.) You must understand that simply paying a job this rate doesn’t automatically exempt it from overtime eligibility. It still must pass the job duties/independent judgment tests.

Highly compensated employees typically perform office or nonmanual duties and are paid at least $107,432 annually. Their wage rate exceeds the minimal $684 a week rate.

Exempt status criteria

Employees’ primary job duties also factor into determining their exemption status. For example, the primary duties for workers classified as professional:

  • Require advanced knowledge
  • Are primarily intellectual
  • Include work that regularly requires the application of independent discretion and judgment

Exempt employees often work more than the standard 40-hour week. However, it is essential to remember that the job must meet the exemption requirements. To say it bluntly, employers may not override the exemption requirement because they don’t want to pay overtime.

Exempt status is considered advantageous to employers because it doesn’t limit the hours an employee can work in a pay period for their earned salary.

State laws may also have different criteria for classification that you must follow. For example, California has additional requirements allowing a job to qualify as exempt, which you can learn about here.

What qualifies as nonexempt?

Employees entitled to overtime pay under the FLSA rules are classified as nonexempt. These job duties are generally classified as:

  • Manual labor
  • Work involving repetitive hand operations
  • Work requiring physical skill and energy

Employees in nonmanagerial jobs in production, construction, maintenance, and various white-collar environments are typically entitled to overtime pay. These workers include:

  • Carpenters
  • Clerical workers
  • Clerks
  • Construction workers
  • Electricians
  • Longshoremen
  • Mechanics
  • Operating engineers
  • Plumbers

Nonexempt employees are traditionally considered “blue-collar” workers.

Some exceptions to nonexempt laws apply under special circumstances to:

  • Police officers
  • Firefighters
  • Workers in hospitals and nursing homes

You can find a list of other first responder occupations that are eligible for overtime here.

Nonexempt wage rates

Under federal law, you must pay nonexempt employees a minimum wage plus overtime pay if they work more than 40 hours in a workweek.

Overtime must be paid at 1.5 times an employee’s regular pay rate. Also, you will need to consult your state and local labor laws for additional requirements, as some states require payment of daily overtime.

Nonexempt criteria

The FLSA doesn’t limit the number of hours employees aged 16 and older may work during any workweek.

Also, the law doesn’t require employers to pay overtime on weekends, holidays, or regular days off. Still, they must pay overtime to employees who worked over their daily or weekly overtime hours on those days.

Are there exceptional circumstances and rule exceptions?

There are situations and exceptions involving overtime to consider. These include paying part-time workers and handling partial exemptions. Here are answers to common questions you may have about applying the law in particular circumstances:

Are exempt employees ever eligible for overtime?

Exempt workers’ position pay level determines their overtime eligibility. Those classified as exempt but whose salary is equal to or less than $684 a week are entitled to overtime for work they perform beyond a 40-hour week.

Do I have to pay part-time employees overtime?

According to the DOL, yes. Part-time employees are typically, but not always, hourly or nonexempt workers, and, as such, you must pay them at least one and one-half times their regular rate of pay after they’ve worked 40 hours in a workweek. They are not eligible for time and a half pay until they have exceeded 40 hours instead of working more than their regularly scheduled number of hours.

Part-time employees are typically, but not always, hourly or nonexempt workers, and, as such, you must pay them at least one and one-half times their regular rate of pay after they’ve worked 40 hours in a workweek.

Again, check federal and state laws that apply — employees subject to state and federal laws are entitled to whichever law requires the higher wage rate.

How do I pay employees who work weekends and nights?

Employees typically work overtime on weekends or nights through an agreement with their employer or union if they’re in a bargaining unit. You’ll want to have policy documented in your employee handbook about working on weekends and nights that complies with WHD laws.

How do I pay my contract workers?

The Contract Work Hours and Safety Standards Act (CWHSSA) requires you to pay contractors, subcontractors, and mechanics on most federal contracts over $100,000 at least one and one-half times their base rate of pay for all hours they worked beyond a 40-hour week.

What are other exclusions under WHD rules?

Employees must be paid at least the federal minimum wage. And certain employees are exempt from overtime pay based on their job duties. However, some workers, besides the exempt employees described above, are considered exempt from minimum wage, overtime pay, or both under FLSA provisions.

Certain employees are exempt from overtime pay based on their job duties.

Here are lists of those employees as listed in DOL’s Employment Law Guide:

Exemptions only from overtime pay

  • Announcers, news editors, and chief engineers of certain non-metropolitan broadcasting stations
  • Auto, truck, or farm implement parts clerks and mechanics employed by non-manufacturing establishments primarily engaged in selling these items to ultimate purchasers
  • Auto, truck, trailer, farm implement, boat, or aircraft salespersons employed by non-manufacturing establishments primarily engaged in selling these items to ultimate purchasers
  • Certain commissioned employees of retail or service establishments
  • Domestic service employees solely employed by the individual, family, or household receiving services (not an agency or other third-party employer) who reside in the private home where they provide services
  • Employees of motion picture theaters
  • Farmworkers
  • Railroad and air carrier employees, taxi drivers, certain employees of motor carriers, seamen on American vessels, and local delivery employees paid on approved trip rate plans

Exemptions from minimum wage and overtime pay

  • Casual babysitters
  • Deliverers engaged in newspaper delivery
  • Employees engaged in fishing operations
  • Executive, administrative, and professional employees (including teachers and academic, administrative personnel in elementary and secondary schools), outside sales employees, and certain skilled computer professionals (as defined in the Department of Labor’s regulations)
  • Farm workers employed on small farms (i.e., those that used less than 500 “man-days” of farm labor in any calendar quarter of the preceding calendar year)
  • Persons employed solely by the individual receiving services (not an agency, non-profit, or other third-party employers) primarily providing fellowship and protection (companionship services) to seniors and/or individuals with injuries, illnesses, or disabilities
  • Seamen employed on foreign vessels
  • Staff of certain small newspapers and switchboard operators of small telephone companies
  • Workers of particular seasonal amusement or recreational establishments

Partial exemptions from overtime pay

  • Employees engaged in certain operations on agricultural commodities and employees of certain bulk petroleum distributors
  • Employees who lack a high school diploma or have not completed the eighth grade spend part of their workweeks in remedial reading or training in other basic skills that are not job specific. Employers may require such employees to engage in these activities for up to 10 hours in a workweek. Employers must pay regular wages for hours spent in such training but need not pay overtime premium pay for training hours
  • Workers at hospitals and residential care establishments that have agreements with the employees that they will work 14-day periods in lieu of 7-day workweeks (if the employees are paid overtime premium pay as required by the Act for all hours worked over eight in a day or 80 in the 14-day work period, whichever is the greater number of overtime hours)

Because exemptions are generally narrowly defined under the FLSA, employers should carefully check the exact terms and conditions for each.

Where can I go for help with WHD questions?

The fines and penalties for misclassifying jobs as exempt rather than nonexempt can be substantial. Exemption status is something you want to make sure you get right.

Employers should carefully check the exact terms and conditions for each.

Therefore, below are some additional links to help employers and employees understand the rights and responsibilities under federal overtime laws:

The Department of Labor (DOL) FLSA Overtime Security Advisor

Overtime Laws, US Department of Labor – DOL.gov

Editor’s note: much of this information is taken directly from the DOL’s website to ensure absolute accuracy.

Might also interest you