Exempt vs. Non-Exempt Employee Classification

Employees who share a company’s goals are motivated employees who do good work. And paying employees properly can ensure they remain motivated. Part of that means properly classifying them as exempt or non-exempt employees.

This article answers some questions about business owners classifying employees as exempt or non-exempt. For legal advice for your situation if you think your employer is misclassifying you, contact a local employment lawyer.

What Is the Difference Between Exempt and Non-Exempt Employees? 

While there are several differences, the main difference between exempt and non-exempt employees is their eligibility for overtime pay under the Fair Labor Standards Act (FLSA).

Non-exempt employees are usually paid at an hourly rate or have a salary below a certain amount set by the U.S. Department of Labor (DOL). Non-exempt employees are also entitled to minimum wage and an overtime pay rate of one-and-a-half times their regular hourly rate when they work more than 40 hours in a workweek. 

Exempt employees are usually paid a salary, work in some sort of administrative or professional role, and are not entitled to overtime pay regardless of how many hours they work in a week. 

The current minimum salary for an exempt employee is $684 per week or $35,568 per year. The DOL updates this salary requirement periodically. Staying on top of this and working with your employment lawyer will help your business remain compliant. 

How Do Employers Classify Employees as Exempt or Non-Exempt? 

To classify employees as exempt or non-exempt, a business must consider your pay rate, duties, and job responsibilities. The FLSA provides the criteria for determining whether employees are exempt or non-exempt: 

• The salary basis test: Exempt employees must earn a fixed salary and not an hourly wage.
• Salary level test: Exempt employees must earn a certain minimum salary. The DOL sets this threshold salary and it is subject to change.
• Duties test: Exempt employees must perform job duties that are administrative, executive, or professional. This includes computer and IT-related jobs, creative professionals, and outside sales jobs.  

What Are the Duties Tests for Exempt Employees? 

Exempt employees are likely white-collar workers who do non-manual work and use independent judgment when making decisions. They must perform a primary duty in the executive, administrative, or professional arena. The FLSA also defines these duties: 

• Executive exemption: This exemption includes employees who manage a business or manage a department. Exempt employees regularly manage at least two other full-time employees and can hire and fire people.
• Administrative exemption: This exemption includes employees who perform office work directly related to business operations. These employees also have some decision-making authority in hiring and firing people.
• Professional exemption: This exemption includes employees with some advanced knowledge in a field of science or professional area of study. Some type of advanced education is likely necessary for this type of exemption. 

What Happens if I Am Misclassified?

If you are classified as exempt but should be a non-exempt employee, this misclassification could entitle you to back pay and back overtime pay for the number of hours you worked. You will need to take action first, such as contacting the state agency that regulates wages in your state or an employment lawyer.

How Can I Avoid Being Misclassified as Exempt? 

To avoid being misclassified, you should conduct regular reviews of your job description, duties, and salary. Make sure that those descriptions, duties, and salaries line up with the current FLSA standards and salary thresholds. If your job changes, make a note of the changes and whether the description and salary changes.

Get Legal Assistance for the Pay You Deserve

If you think you are misclassified an employee with exempt status, you should address it promptly. You have the right to speak with your supervisor or human resources department about your wages. Speaking up could lead to long-term fixes like adjusting payroll practices, changing job titles, assessing employee classification for other employees, and implementing new human resources and recordkeeping practices and protocols.   

Employment laws are complex, and labor laws and state and federal minimum wage laws are always evolving. If your supervisor or HR department refuses to address your concerns, talk to an employment lawyer near you for legal advice about the next steps.