What’s the difference between exempt and nonexempt employees?
What Does a Nonexempt Employee Mean?
For purposes of the Fair Labor Standards Act (FLSA), employees can be grouped into two categories: exempt and nonexempt.
The difference basically comes down to pay for overtime work. Exempt employees are exempt from being paid overtime. Nonexempt employees must be paid overtime.
The Fair Labor Standards Act is a federal law, and its provisions apply in all 50 states. Many states have their own wage and hour laws, separate from and in addition to the standards and requirements imposed by the FLSA. If you are doing your own compliance research, be sure to check with your State’s Department of Labor for this information.
One FLSA requirement mandates employers pay their nonexempt employees overtime pay for any additional hours worked outside of the standard 40-hour workweek. By law, employers are required to pay the equivalent of time and half of an employee’s pay rate for each hour they work over the regular 40 hours per week. Of course, employers can choose to pay exempt employees overtime pay, but that decision is not mandated by federal law.
In brief, nonexempt employees are entitled to overtime pay under the FLSA.
How Can I Tell if an Employee is Exempt or Nonexempt?
The easiest way to tell if an employee is exempt or nonexempt is to determine whether or not they fall into one of the “exemptions” set out by the United States Department of Labor. Effective January 1, 2020, federal law provides exemptions for executive, administrative, professional, computer, and outside sales employees. All other employees, therefore, are nonexempt from the FLSA overtime pay requirement.
The exemptions provided apply only to “white-collar” employees. The exemptions do not apply to manual laborers or other “blue-collar” workers who perform work involving “repetitive operations with their hands, physical skill and energy” – wording borrowed directly from a fact sheet published by the United States Department of Labor. Blue-collar employees are nonexempt employees.
Exemptions also apply to employees who are paid a salary, rather than an hourly wage, of at least $684 per week, or $35,568 annually. It is important to note that job titles alone do not determine exemption status. Just because someone is called an “administrator,” for example, doesn’t mean they are an exempt employee. If an employee does not actually meet all of the Department of Labor requirements to qualify for an exemption, they must be paid overtime pay.
The Department of Labor gives specific details regarding what counts as an executive, administrative, professional, computer, or outside sales employees. For example, to qualify as an administrative employee, 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 must include the exercise of discretion and independent judgment with respect to matters of significance.
Whether an employee is exempt or nonexempt is an important distinction. As a professional, you know how important legal compliance is. Making sense of federal and state laws can be complicated. If your organization would benefit from access to certified HR experts, it’s time to contact Benely.