As an employer, you should be well-versed in labor law to keep compliant with regulations and keep your expenses in check. For instance, classifying your employees as either exempt or non-exempt correctly from the get-go will help you evade costly and unnecessary lawsuits.<\/p>\n\n\n\n
In this article, we\u2019ll compare exempt vs. non-exempt employees. In addition, we\u2019ll explain the Fair Labor Standards Act (FLSA) in terms of how it regulates the two types of employees and discuss what happens if an employer doesn\u2019t comply with the rules.<\/p>\n\n\n\n
An exempt employee is a worker that is usually paid a salary rather than an hourly rate. They are referred to as \u201cexempt\u201d because they are not eligible for minimum wage and overtime pay. However, the employer may choose to compensate them if they work overtime and reward them with bonuses.<\/p>\n\n\n\n
As opposed to exempt workers, employees that are classified as non-exempt tend to be paid on an hourly basis. Furthermore, the employer is obligated to pay them in accordance with the overtime rate for each week that had them working over 40 hours.<\/p>\n\n\n\n
Further distinctions between exempt and non-exempt workers have to do with their job responsibilities. All of these rules are regulated by the Fair Labor Standards Act, which we\u2019ll explore in more detail in the section below.<\/p>\n\n\n\n
The Fair Labor Standards Act (FLSA)<\/a> is a federal law that establishes certain rules whose purpose is to protect employees. These rules are related to the minimum wage, overtime pay, recordkeeping, work hours, and youth employment.<\/p>\n\n\n\n This act was signed into law in June 1938 by President Franklin D. Roosevelt. Under the FLSA regulations, the federal minimum wage is set at $684 per week or $35,568 per year, which has been in effect since January 1, 2020.<\/p>\n\n\n\n According to the FLSA rules, employers must compensate non-exempt employees if they work for more than 40 hours a week. The overtime payment can\u2019t be less than one-and-a-half times their hourly rate.<\/p>\n\n\n\n Salaries or hourly wages, overtime pay, bonuses, and other payments for employees can easily be calculated using some of the top-tier employee payroll software<\/a>. Tracking hours your employees worked<\/a> doesn\u2019t have to be complicated either, as there are programs that can do just that. <\/p>\n\n\n\n Rather than classifying each worker as an exempt employee or a non-exempt employee according to their job title, the FLSA has established specific types of potentially exempt workers. These categories of exempt employees include executive, administrative, learned professional, creative professional, computer-related, outside sales, and highly compensated employees. <\/p>\n\n\n\n These employees are exempt if they meet specific requirements. Apart from the above-mentioned criteria, which include salary amount and payment type, there are certain job responsibilites that qualify them for exemption.<\/p>\n\n\n\n To be considered exempt, according to the U.S. Department of Labor, an executive employee\u2019s duties must include supervising a minimum of two full-time or four part-time employees. Full-time employees are typically considered those who work more than 35 hours a week, while their part-time counterparts work below that threshold. <\/p>\n\n\n\n In addition, their responsibilities should be related to managing the business, at least in part, and managing the employees in terms of assigning tasks, hiring, and the like.<\/p>\n\n\n\n An exempt administrative employee is a person who makes business decisions without being supervised by another employee. This worker performs non-manual or office duties that directly correlate with business operations.<\/p>\n\n\n\n Learned and creative professional employees are both types of exempt employees. The exempt learned professional employee is considered to be someone who has gained advanced knowledge through some form of education. <\/p>\n\n\n\n This knowledge is referred to as \u201cintellectual in character.\u201d These employees must utilize their advanced knowledge of the fields of science or learning in a way that requires discretion and judgment.<\/p>\n\n\n\n On the other hand, creative professional employees belong to the group of exempt occupations if they work in a recognized artistic or creative field. Their duties must require \u201cinvention, imagination, originality or talent.\u201d<\/p>\n\n\n\n Computer-related employees must perform one of the specifically outlined duties or a combination of them to be considered exempt. These duties include:<\/p>\n\n\n\n For an outside sales employee to be exempt under the FLSA, their primary duty needs to be related to selling products or services or dealing with contracts or orders. This work must be conducted outside of the employer\u2019s business premises. <\/p>\n\n\n\n Highly-compensated employees are workers who earn at least $107,432 per year. They are exempt if at least one of their duties overlaps with the responsibilities of exempt executive, administrative or professional employees.<\/p>\n\n\n\n On the other hand, as a rule, non-management blue-collar positions are typically categorized as non-exempt. The same goes for first responders, such as police officers, detectives, deputy sheriffs, investigators, inspectors, correctional officers, firefighters, paramedics, ambulance personnel, and rescue workers. That\u2019s because their duties usually don\u2019t meet the FLSA criteria.<\/p>\n\n\n\n For example, in the Philip Fowler and Jeffrey Swans v. OSP Prevention Group, Inc. and William E Mabry II case, two property damage investigators sued the company they worked at for classifying them as exempt administrative employees and thus not compensating them for overtime work. <\/p>\n\n\n\n They argued that they were, in fact, non-exempt employees, as they were being paid by the hour rather than a salary. As they worked over 40 hours per week, they believed they were entitled to an overtime rate.<\/p>\n\n\n\n The district court ruled in favor of OSP Prevention Group. However, Fowler and Swans appealed this decision to the U.S. Court of Appeals for the Eleventh Circuit. This time, the plaintiffs won the case, as it was ruled that they should have been indeed classified as non-exempt workers and that they ought to be reimbursed for having worked overtime.<\/p>\n\n\n\n As you can see, the differences between exempt and non-exempt workers are not as clear-cut as they may seem on the surface. That\u2019s why it\u2019s imperative that employers carefully and thoroughly study labor laws. Only then can they be sure they comply with all of the laws and treat their employees fairly.<\/p>\n","protected":false},"excerpt":{"rendered":" As an employer, you should be well-versed in labor law …<\/p>\nWhat Job Duties Qualify an Employee for Exemption?<\/h2>\n\n\n\n
Executive Employees<\/h3>\n\n\n\n
Administrative Employees<\/h3>\n\n\n\n
Learned and Creative Professional Employees<\/h3>\n\n\n\n
Computer-Related Employees<\/h3>\n\n\n\n
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Outside Sales Employees<\/h3>\n\n\n\n
Highly-Compensated Employees<\/h3>\n\n\n\n
What Happens if You Don\u2019t Classify an Employee Correctly?<\/h2>\n\n\n\n
Final Comments<\/h2>\n\n\n\n