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The quickest way to understand classifying exempt and nonexempt employees

Author: BLR

How to Classify Exempt Employees and Nonexempt Employees

Nonexempt employees. Nonexempt employees are those who are covered by the FLSA’s minimum wage and overtime pay provisions. An employee who is paid on an hourly basis is usually considered to be nonexempt, regardless of the hourly rate paid. Employees are also nonexempt if they do not qualify for one of several white-collar exemptions. Employees generally classified as nonexempt include, but are not limited to, clerical, blue-collar, maintenance, construction, and semiskilled workers, as well as technicians and laborers.

Exempt employees. The FLSA exempts broad categories of white-collar jobs from minimum wage and overtime requirements if they meet certain tests regarding job duties and responsibilities and are paid a certain minimum salary. These categories of employees are commonly known as “exempt” employees and include executive, administrative, and professional employees. The FLSA also provides exemptions for outside sales personnel, certain specialized computer personnel, certain highly compensated employees, certain retail sales employees, and employees covered by the Motor Carrier Act (MCA).

Determining Exempt or Nonexempt Status: the Salary and Duties

DOL Wage and Hour Division regulations require that an employee be paid on a salary basis and perform certain duties in order to be classified as exempt. The salary and duties tests are explained, below:

Salary. Exempt white-collar employees must generally be paid on a salary basis and receive a minimum salary of at least $684 per week. (There are exceptions: Computer programmers, systems analysts, and similar employees may be exempt if they are paid at an hourly rate of $27.63 or more). To be exempt, employees must generally be paid a predetermined amount each pay period. The amount paid may not be reduced because of a variation in the quality or quantity of the work performed. With limited exceptions, the employee must receive his or her full salary for any week in which he or she performs any work, without regard to the number of days or hours worked. However, the employee need not be paid for any workweek in which he or she performs no work.

Duties. The FLSA exempts bona fide administrative, executive, and professional employees from minimum wage and overtime requirements. The FLSA regulations require that an employee perform certain duties in order to be classified as exempt. Employers should remember to look at the job duties, not the job title, of an employee to determine whether an exempt status applies.