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Exempt Employees vs. Non-Exempt Employees

Question

The difference between exempt and non-exempt employees is perhaps one of the most complex and confusing aspects of the Fair Labor Standards Act (FLSA). That is probably why so many employees are misclassified, resulting in costly lawsuits and fines.

Generally speaking, most employees whose jobs are covered under the FLSA are considered non-exempt. However, the FLSA also provides exemptions from both the minimum wage and overtime pay requirements for certain classes of employees. In order to qualify for an exemption, employees’ job duties and salaries must meet specific requirements. It is important to note that job titles or being paid on a salary basis does not determine whether an employee is exempt or not.

Non-Exempt Employees

Non-exempt employees may be paid on an hourly basis, a salary basis, a piece-rate basis or some other basis, as long as they receive at least the federal minimum wage for all hours worked and overtime pay at a rate of time and one-half the regular rate of pay for all hours worked in excess of 40 hours in a workweek. The “regular rate of pay” includes all remuneration for employment except certain payments excluded under the FLSA, including pay for expenses incurred on the employer’s behalf, gifts on special occasions, and payments for occasional periods when no work is performed due to vacation, holiday or illness. The overtime requirement may not be waived by any agreement between an employer and a non-exempt employee.

Under the FLSA, every covered employer is required to keep certain records for each non-exempt worker:

  •  Certain personal information about each employee, including full name, Social Security Number, address, date of birth (if younger than 19) and gender
  • The occupation in which they are employed.
  • The time and day of the week when the workweek begins.
  • The hours worked each day.
  • Total hours worked each workweek.
  • The basis on which wages are paid.
  • The regular hourly pay rate.
  • The total daily or weekly straight-time earnings.
  • The total overtime earnings for each workweek.
  • All additions to or deductions from the employee’s wages.
  • The total wages paid each pay period.
  • The date of payment and pay period covered by each payment.

Exempt Employees

Exempt employees have fewer rights under the FLSA. They are not entitled to overtime pay, and employers are not required to track their hours. That means exempt employees may work an unlimited number of hours in a workweek.

Section 13(a)(1) and Section 13(a)(17) of the FLSA provide exemptions from the minimum wage and overtime pay protections for five types of employees: executive, administrative, professional, outside sales and certain computer employees. Collectively, these exemptions are commonly referred to as the “white collar” exemptions. To view the tests employees must meet for each of these exemptions, download G&A Partners ‘White Collar’ FLSA Exemptions Fact Sheet. Keep in mind that this list is not comprehensive – additional regulations may exempt employees in other specific situations from the minimum wage and/or overtime requirements of the FLSA.

Exempt employees who are paid on a salary basis receive a pre-determined compensation rate each pay period, and this amount isn’t subject to reduction as a result of a variation in hours or the quality of the employee’s work. There are specific rules governing whether or under what circumstances an employer may deduct can deduct pay from an exempt employee’s salary.

The FLSA’s record keeping requirements differ for exempt employees. Employers are required to keep the following records for each exempt employee:

  • Certain personal information about each employee, including full name, address, date of birth (if younger than 19) and gender.
  • The occupation in which they are employed.
  • The time of day and day of the week the workweek begins.
  • The total wages paid each pay period.
  • The date of payment and the pay period covered by each payment.

The regulations governing exempt employees are just one aspect of the Fair Labor Standards Act. G&A Partners’ experienced human resource professionals understand the nuances of all federal and state labor laws, including the FLSA, so they can help companies expertly plan and execute procedural tasks surrounding government compliance. With G&A Partners managing your HR labor law and HR compliance, you can rest assured that your employees are afforded the protection of federal laws, and that you are protected from the risk of human resources noncompliance.

Learn how G&A Partners can help you protect your business and employees through HR labor law and compliance services by contacting us by phone at 1-800-253-8562 to speak with an expert or visiting https://www.gnapartners.com/contact-us/ to schedule a business consultation.

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