BPHR’s Director Lisa Salcido, SPHR, SHRM-SCP provides answers to your pressing HR questions.
Question: We need to identify our exempt employees to prepare for the overtime rule changes coming in January. What is the difference between an exempt employee and a non-exempt employee?
Answer: The difference between exempt and non-exempt is that an exempt employee does not get paid (or, is exempt from) overtime.
The Fair Labor Standards Act (FLSA) is a federal law that requires employees to receive at least minimum wage for each hour worked and overtime pay for hours worked over 40 in a workweek. Employees who are entitled to both minimum wage and overtime are non-exempt.
Some employees are exempt from the FLSA’s minimum wage and overtime pay requirements if they are employed in a bona fide executive, administrative or professional capacity as defined by the Department of Labor. These are known as “white collar” exemptions.
Employees who are properly classified as exempt are not entitled to minimum wage or overtime. To qualify for an exemption, each position must pass all three FLSA employment tests regarding their salary, job duties and responsibilities. Simply classifying an employee as “salaried,” rather than hourly, does not automatically make them exempt.
The FLSA tests guidelines are:
- Salary level: The employee must make at least $455 per week or $23,660 per year. The new overtime rule will increase the salary level to $684 weekly, or $35,568 annually, on January 1, 2020.
- Salary basis: The employee must be paid the same each week regardless of hours worked or the quantity or quality of their work. Reducing an exempt employee’s pay is only allowed in very few circumstances.
- Duties: The employee must perform specific tasks and regularly use their independent judgment and discretion. Each exemption has its own duties test. Job duties must be assessed, job title alone does not determine exemption status.
If an employee does not meet all the criteria under a specific exemption, they must be classified as non-exempt, and paid at least minimum wage and overtime. Incorrectly classifying an employee as exempt, and then failing to pay overtime, can lead to criminal prosecution, substantial fines and back pay equal to double the unpaid wages.
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DISCLAIMER: The material presented on this page is for informational purposes only and does not constitute legal advice or legal opinion.