Employees should sign a document that acknowledges their agreement to these terms of employment. And on a day-to-day basis, managers should encourage employees to get away from their desks while on breaks or lunch. One of the biggest differences between exempt and non-exempt employees is overtime pay. Also, to qualify for exemption from overtime, employees must also meet certain employment tests regarding their job duties and responsibilities. The FLSA guarantees non-exempt employees one and one-half times their normal pay rate for overtime worked during a given work period. If an employee is considered exempt (vs. non-exempt), their employer is not required to pay them overtime pay.
- Additionally, there may be state or local rules that must be followed for overtime or minimum wage compensation.
- Depending on the nature of their work, journalists may or may not be exempt under this rule.
- All other employees would automatically be eligible for overtime regardless of job responsibilities.
Non-exempt employees may have to adhere to stricter regulations, such as clocking in and out, but also know that any work over their regular hours means a heftier paycheck. There are benefits and drawbacks to both exempt and non-exempt employment, so you’ll need to weigh several factors before deciding which classification is right for you. As a general rule, exempt employees earn higher salaries and have more autonomy than non-exempt employees. While they may be able to take longer lunches or leave for an appointment in the middle of the day, they are also more likely to be required to come in early or stay late, often resulting in over 40 working hours per week. This means that their employees, for the most part, will be considered non-exempt.
Can you re-classify an employee from exempt to nonexempt?
Employees should keep in mind, however, that there are strict deadlines they need to meet to file a wage claim or lawsuit. This penalty often arises when the employee isn’t sure how much back-pay they might be owed because the employer mistakenly classified the employee as exempt. It is therefore important to carefully determine whether an employee meets all requirements of the test. Certain cities and counties have established a minimum wage higher than the statewide minimum wage. The information provided is brought to you as a public service with the help and assistance of volunteer legal editors, and is intended to help you better understand the law in general. It is not intended to be legal advice regarding your particular problem or to substitute for the advice of a lawyer.
Employees must also meet one or more of the DOL’s job duties test to be classified as exempt from the overtime and minimum wage provisions of the FLSA. Exempt employees tend to work in roles that require little direct supervision and require special skill or knowledge. Exempt employees also typically have the authority to make suggestions or recommendations about their work, although a higher level of management might make a final decision. Keep in mind that some jurisdictions have additional rules regarding who qualifies as exempt vs. nonexempt (for instance, with regards to salary thresholds). Labor laws provide the legal guidelines for an employer to pay its employees and include wage and hour laws. The Department of Labor (DOL) oversees and regulates these laws, which include provisions for minimum wage, overtime, paid leave and breaks.
Ultimately, employers are responsible for defending a role’s exempt status if it’s ever challenged, and any misclassifications could be subject to legal action. For example, an employee could file a complaint with the DOL or file a lawsuit against the employer for unpaid wages, overtime, or other benefits they were entitled https://adprun.net/ to as a result of being misclassified. The DOL can then assess penalties for reparations on the employee’s behalf. Because exempt employees receive a fixed salary each pay period, their earnings are considered regular income and are subject to federal income tax, as well as state and local income tax, where applicable.
Ensure compliance and accurate employee data with automated payroll software. Misclassifying employees is one of the most common payroll errors and one of the costliest. Out of all the different ways to classify employees, exempt vs. non-exempt is the broadest – and perhaps least self-descriptive. She spends most of her time pitching her company’s products to hospitals and supermarkets, on location. While most of your engineers likely hold degrees, note that education does not explicitly factor into the computer professionals exemption.
There are regulations that govern whether an employee could be exempt from receiving overtime pay. Independent contractors may be considered “exempt,” as they aren’t covered by the FLSA — however, exempt and nonexempt statuses generally apply to employees. Independent contractors aren’t employees. The FLSA governs federal minimum wage, overtime, recordkeeping, and youth employment for employees working in both the private and public sectors. One unique example is California, a state known in the HR community for going its own way.
How Do You Determine Whether an Employee Should Be Exempt vs. Nonexempt?
If you’ve never heard of the FLSA, it’s the legislation that governs when an employer is required to pay an employee overtime, among other things. While some states may have their own overtime laws, the FLSA applies nationwide. Although an employee commonly may be considered a “professional”, there are specific legal requirements that must be met to qualify for the professional exemption.
Don’t get creative with bonuses and extra pay
The proposed changes would also increase the annual salary threshold for highly compensated workers from $107,432 to $143,988. If these changes become law, it would extend overtime protections to nearly 3.6 million salaried employees. Exempt Analysis Worksheet – Salesperson Exemption »
Use this worksheet to help evaluate the exempt or nonexempt status for your sales staff. Exempt Analysis Worksheet – Executive Managerial Exemption »
Use this worksheet to help evaluate the exempt or nonexempt status for your managers or executives. Exempt Analysis Worksheet – Computer Professional Exemption »
Use this worksheet to help evaluate the exempt or nonexempt status for your computer professionals. Specifically, a delayed payment can result in a penalty of up to 30 days of the employee’s wages.102 The unpaid wages accrue on a daily basis, not just for the days that the employee might have worked—but also on non-workdays.
Professional Employees
Overtime pay at a rate not less than one and one-half times the regular rate of pay is required after 40 hours of work in a workweek. An exempt employee is not entitled to overtime pay according to the Fair Labor Standards Act (FLSA). To be exempt, you must earn a minimum of $684 per week in the form of a salary.
Practice management & growth
On the other hand, non-exempt workers are typically paid on an hourly basis and receive overtime pay for any hours worked over the standard 40 per week — although some states have their own laws that vary from this general rule. Exempt employees are not eligible to receive overtime pay under FLSA laws and they are typically paid a salary rather than an hourly wage. These employees are expected to complete a set amount of work, no matter how many hours it takes.
The “salary test” required for exempt employees provides that the full weekly salary be paid for any week in which any work is performed, with only very limited exceptions. Employees who have been deprived of overtime pay because of a misclassification can seek back-pay for the unpaid overtime wages the employee earned.91 These can add up quickly, even for employees earning a low amount. If all three requirements are met, the employee will usually be classified as “exempt” from overtime, minimum wage, and rest break exempt vs non-exempt requirements (but not meal break requirements). See other fact sheets in this series for more information on the exemptions for executive, administrative, professional, computer and outside sales employees, and for more information on the salary basis requirement. Depending on your responsibilities at work (as stated in your job description), you may be an exempt employee one week and non-exempt another week. It is possible to be misclassified as exempt which might entitle you to back-pay for unpaid overtime work.
Therefore, speak with a qualified compensation consultant or labor attorney to determine who should be classified as exempt. Executive and administrative employees in New York must be paid at least 75 times the state’s minimum wage to be exempt from overtime pay. If upstate employees earn $1,065 per week, they may also be considered exempt. This is a state where “professional” employees (as defined by a job duties test) do not have a minimum pay rate to qualify for exemption.
Relatively few individuals qualify for exemption as members of artistic professions in California, since most of those who have sufficient control over the nature of their own work and over their work hours are self-employed. To determine whether the California employee is primarily engaged in exempt work, the California’s Labor Commissioner examines the work performed by the employee during the workweek. The best way to resolve an exemption dispute will depend on the employee’s specific situation. It’s usually a good idea to get the opinion of a lawyer before deciding how to proceed.