Exempt and Non-Exempt Employees Explained

Federal and state laws set minimum wage and overtime protections for employees. However, many salaried employees are exempt from these protections. To understand your employee rights, it’s important to know whether you’re an exempt or non-exempt employee. For legal help, contact a local wage and hour lawyer for legal advice.

Understanding Employee Classification

The federal Fair Labor Standards Act (FLSA) establishes a minimum wage and overtime pay for most hourly and part-time employees. It also has child labor protections and mandatory recordkeeping requirements.

The federal minimum wage is $7.25 per hour. Overtime pay is 1.5 times the regular rate of pay for work over a 40-hour workweek.

The FLSA applies to most workers paid on an hourly basis. However, some employees are exempt from the FLSA, including:

• Administrative employees
• Executive employees
• Professional employees
• Outside sales employees
• Some computer employees (software engineers, programmers, and systems analysts)
• Highly compensated employees

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Criteria for Exempt Employees

Employees must meet the following U.S. Department of Labor (DOL) criteria to qualify as exempt.

Minimum Salary Level

The minimum salary for exempt employees is $684 per week. About half of the states have a higher minimum wage than the federal level. In these states, the minimum salary to qualify for an exemption is higher. Workers should check their state laws to understand which employment and labor laws apply.

Fixed Salary Basis

Exempt workers receive a fixed salary payment regardless of how many hours they work. Many salaried employees do not clock in or out or keep track of hours. They may end up working longer hours, check in on evenings and weekends, or be available outside office hours as part of the job.

Job Duties

Exempt workers must meet one of the following job duties tests:

• Executive employees. Regularly direct at least two other full-time employees (or equivalent). An executive’s primary duty involves managing a company or department, including the authority to hire, fire, or provide recommendations.
• Administrative employee. Perform office or non-manual work directly related to the business.
• Professional employees. Do work requiring creative or advanced knowledge, such as scientific expertise.
• Computer employees. Must receive the minimum exempt salary or an hourly rate of at least $27.63. Primary duties include systems analysis, designing and developing computer systems or programs, and programs related to machine operation systems.
• Outside sales employees. Primarily involved in sales or getting orders or contracts. Outside sales work involves regularly working away from the employer’s place of business.
• Highly compensated employees. Employees whose total annual compensation is at least $107,432 are also exempt from FLSA regulations.

FLSA Exemptions for Independent Contractors

Independent contractors and freelancers are not employees and are therefore exempt from FLSA wage and overtime rules. There are tests to determine whether a worker is an employee or a contractor. A key factor is whether the person is independent from the employer’s control and can work with other companies at the same time.

Wrongly classifying employees as contractors is a common problem. Some employers misclassify employees as contractors to avoid labor protections. Employers don’t have to pay for benefits or payroll taxes for contractors. Wrongly classified employees can take legal action against the employer to recover compensation.

Rights of Non-Exempt Employees

Non-exempt employees must get at least the federal minimum wage or their state’s higher minimum wage. Non-exempt employees get overtime pay for any hours over 40 hours per workweek.

The FLSA also establishes what work time qualifies as compensable hours. The FLSA does not require rest breaks or meal times. However, if employers offer meal breaks, they cannot require employees to work through the break without pay.

If employers don’t pay a minimum wage or don’t pay overtime, employees can contact the DOL Wage and Hour Division (WHD). Workers can file a complaint with the WHD to investigate unpaid wages. The WHD can help workers recover back pay and liquidated damages for wage and hour violations.

The FLSA also protects non-exempt workers against unlawful retaliation. Employers cannot take adverse employment action against workers for filing an FLSA complaint or cooperating with labor law investigations.

Legal Advice About Wage and Hour Protections

There are many benefits for exempt employees with a good salary and benefits. However, low-salaried employees misclassified as exempt can lose out on overtime and fair pay for their hours of hard work. Understand your wage and hour laws and how to protect your legal rights.

Many states have wage and hour laws that are stronger and more expansive than federal laws. Talk to a local employment lawyer about your state and local labor laws. If your employer is violating the FLSA or local labor protections, your attorney can explain your legal options. Contact a local wage and hour lawyer for legal advice.