Exempt vs Non-Exempt Employees

Workers are generally categorized as either exempt or non-exempt employees, which depends on their salary and the type of work they do within their organizations.  The federal Fair Labor Standards Act (FLSA) expects, in addition to paying at least the minimum wage, that employers must also pay overtime to those employees who work in excess of 40 hours within a given workweek, unless they meet certain exemptions.  To make matters more complicated, many states have wage and hours laws that have more constraints than the FLSA.  Employers must make certain that they abide by both federal and state wage and hours laws to avoid legal turmoil.

To be considered an “Exempt Employee” there are three criteria which must be met:

  1. Must satisfy a specific exemption – example: executive, administrative, professional, industry
  2. Salary component: employees must earn $455/week under the FLSA. Important note: This amount may be increasing to $970, $675 under state law.
  3. Employees must satisfy a duties test

The employer bears the burden of proving that you have correctly classified an employee as exempt. It is important that you consult with a labor attorney to review how these rules apply to your business.

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