Exempt Vs. Non-Exempt Employees And The FLSA

employee status

The Fair Labor Standards Act (FLSA) covers several items, including what positions are considered exempt vs. nonexempt positions. The FLSA is a federal law that all states must adhere to and remain compliant with.

First, a couple of definitions:

Exempt Employee: employees who are salaried and are not eligible to receive overtime pay.

Non-Exempt Employee: employees who are hourly and are eligible to receive overtime pay.

So, how does a company determine if a position is considered exempt or non-exempt? The FLSA defines and determines what types of positions are eligible for which type of job through an evaluation of salary level, salary basis, and job duties. First and foremost, employees may or may not be covered depending on the number of employees in the company, the amount of business the company does per year, and the type of position the employee holds. Also, to be covered under the FSLA, there must be an employee – employer agreement; contract employees are not covered.

There are five main classifications that would qualify an employee to be exempt: executive, administrative, professional, outside sales, and in some cases computer employees. This post will focus on the job duties as the title alone does not qualify an employee as exempt. However, in all cases, to be exempt the employee must receive a minimum of $455 per week in wages. It is also worth noting that highly compensated employees receiving $100,000 in annual compensation, and meet the requirements of the job test, are exempt from the FLSA.

Specific job duties tests must be conducted and met to qualify the employee with one of the above job titles as exempt. This test information comes directly from the FLSA.

Executive Exemption

Fact Sheet #17B for the FLSA requires the following criteria to be met to determine executive exemption status:

  • The employee must be compensated on a salary basis (as defined in the regulations) at a rate not less than $455 per week;
  • The employee’s primary duty must be managing the enterprise, or managing a customarily recognized department or subdivision of the enterprise;
  • The employee must customarily and regularly direct the work of at least two or more other full-time employees or their equivalent; and
  • The employee must have the authority to hire or fire other employees, or the employee’s suggestions and recommendations as to the hiring, firing, advancement, promotion or any other change of status of other employees must be given particular weight.

Administrative Exemption

Fact Sheet #17C for the FLSA requires the following criteria to be met to determine administrative exemption status:

  • The employee must be compensated on a salary or fee basis (as defined in the regulations) at a rate not less than $455 per week;
  • The employee’s primary duty must be the performance of office or non-manual work directly related to the management or general business operations of the employer or the employer’s customers; and
  • The employee’s primary duty includes the exercise of discretion and independent judgment with respect to matters of significance.

Professional Exemption

Fact Sheet #17D for the FLSA requires the following criteria to be met to determine professional exemption status:

  • The employee must be compensated on a salary or fee basis (as defined in the regulations) at a rate not less than $455 per week;
  • The employee’s primary duty must be the performance of work requiring advanced knowledge, defined as work which is predominantly intellectual in character and which includes work requiring the consistent exercise of discretion and judgment;
  • The advanced knowledge must be in a field of science or learning; and
  • The advanced knowledge must be customarily acquired by a prolonged course of specialized intellectual instruction.

Outside Sales Exemption

Fact Sheet #17F for the FLSA requires the following criteria to be met to determine outside sales exemption status:

  • The employee’s primary duty must be making sales (as defined in the FLSA), or obtaining orders or contracts for services or for the use of facilities for which a consideration will be paid by the client or customer; and
  • The employee must be customarily and regularly engaged away from the employer’s place or places of business.

Computer-Related Occupation Exemption

Fact Sheet #17E for the FLSA requires the following criteria to be met to determine computer-related occupation exemption status:

  • The employee must be compensated either on a salary or fee basis at a rate not less than $455 per week or, if compensated on an hourly basis, at a rate not less than $27.63 an hour;
  • The employee must be employed as a computer systems analyst, computer programmer, software engineer or other similarly skilled worker in the computer field performing the duties described below;
  • The employee’s primary duty must consist of:
    • 1) The application of systems analysis techniques and procedures, including consulting with users, to determine hardware, software or system functional specifications;
    • 2) The design, development, documentation, analysis, creation, testing or modification of computer systems or programs, including prototypes, based on and related to user or system design specifications;
    • 3) The design, documentation, testing, creation or modification of computer programs related to machine operating systems; or
    • 4) A combination of the aforementioned duties, the performance of which requires the same level of skills.

When determining whether an employee is exempt or not be sure to consult with these tests so that your company is in full compliance with the FLSA laws. Keep in mind that state laws also affect how employees are classified. When determining the proper classification for your employees be sure to check the state laws as well. The law that protects the employee the most is the law that should be followed. Additional information on exempt vs. non-exempt employees can be found on the Wage and Hour Division site.

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