A non-exempt employee is subject to the U.S. Fair Labor Standards Act (FLSA) rules on overtime and minimum wage. They must be paid minimum wage or higher and must receive “time and a half” or 1.5 times their hourly pay for anything above 40 hours per week.
So, for example, if a non-exempt employee works 45 hours in a week and their salary is $10 per hour, they would receive $10 per hour for their first 40 hours, and $15 per hour for the last 5.
Blue collar workers, police, firefighters, paramedics, and first responders are always considered non-exempt, even if they meet other exempt criteria.
What Is an Exempt Employee?
An exempt employee is not subject to overtime and minimum wage rules set by the FLSA. Exempt employees can legally work for less than the federal minimum wage or work more than 40 hours per week without overtime compensation.
State and Federal Labor Laws:
States have their own labor laws, and an employee who is exempt from federal overtime and minimum wage laws may not be exempt from state laws.
What Qualifies as an Exempt Employee?
For an employee to qualify as exempt the employee must be paid at least $55 per week ($23,600 per year), be paid on a salary basis, and perform exempt job duties including administrative, computer, executive, professional, creative, or outside sales duties.
Below we go into detail about each of the exempt duties, and how the FSLA defines them. First is the administrative exemption.
To qualify for the administrative exemption, employees must earn at least $455 weekly. Their primary duty must be non-manual office work directly related to management or general business operations for the employer or customers. The employee must use independent judgment for significant decisions.
Computer and tech employees may qualify for exempt status. FLSA rules have very detailed guidelines for what type of work they must perform to qualify.
Computer Employee Exemption:
To qualify for the computer employee exemption employees must be on a salary or fee basis of at least $455 per week or receive $27.63 in hourly pay. They must work as a computer systems analyst, computer programmer, software engineer or similarly skilled worker.
Work for exempt computer employees must include:
- Application of systems analysis techniques and procedures.
- The analysis, creation, design, development, documentation, testing or modification of computer systems or programs based on and related to user or system design specifications.
- The creation, design, documentation, testing, or modification of computer programs related to operating systems.
- A combination of the above duties, requiring the same skill level.
Executive level employees often qualify for exempt status. The ability to qualify is partially related to whether they can perform certain human resources functions.
Executive Employee Exemption:
To qualify for the executive exemption employees must earn a salary of at least $455 weekly. Their primary duty must be managing the organization or a recognized department. They must direct 2 or more full-time employees, with the ability to hire, fire, and make decisions on employee status.
Professional who require a high level of education to perform their job may qualify for exemption status.
Learned Professional Exemption:
Employees who qualify for the learned professional exemption, must be on a salary or fee basis of at least $455 weekly. Their primary duty must require advanced knowledge in their field acquired by extensive education and be mostly intellectual in nature. They must exercise discretion and judgment.
Creative professionals, such as artists and musicians, may qualify for exempt status.
What Is the Creative Professional Exemption?
The creative professional exemption allows employers to not pay overtime if the employee is on a salary or fee basis of at least $455 per week, and their primary duty requires invention, imagination, originality or talent in a recognized artistic or creative field.
Outside salespeople may qualify for an exemption.The rules are pretty simple and clear for this type of employment.
Outside Sales Exemption:
To be considered for the outside sales exemption an employee’s primary duty must be sales as defined in the FLSA, or getting contracts or orders for services or for the use of facilities. Employee must normally and regularly work away from the employer’s business locations.
Employees who earn very high pay, and perform executive duties, often qualify for exemption.
Highly Compensated Employees Exemption:
An exempt highly compensated employee must perform office or non-manual work and be paid annual compensation of $100,000 or more with a $455 per weekly salary or fee. They must normally and regularly perform at least one of the duties of the exempt administrative, executive, or professional.
Answers to Common Questions About Exempt Status:
Employers and employees often have questions about exemption and overtime rules. We've answered the most common ones below.
Do Exempt Employees Have to Pay Taxes?
Yes. Exempt status means that employers are exempt from having to pay overtime to the employee. It does not mean that the employee is exempt from taxes in any way.
Salaried employees are often exempt, so the next question comes up quite a bit regarding exempt status.
Do You Have to Pay Overtime to Salaried Employees?
While salaried employees are most frequently in the exempt category, which means employers don't need to pay overtime, they are not always in it. The FSLA has specific definitions for what types of employees can and cannot receive exempt status.
The next question closely relates to the previous one and often comes up in forum discussions.
What Is an Exempt Salary Employee?
This means an employer pays a salary but does not have to pay minimum wage or time and a half if the employee works more than 40 hours per week.
Latest News on Exempt Employee Rules:
The U.S. Department of Labor had planned to make changes to the FLSA rules that would have increased the salary requirements in most cases to $47,500 per year to be considered exempt.
On December 2016, the new rule has been blocked from going into effect by an emergency motion from the U.S. District Court for the Eastern District of Texas. On June 30, 2017, the Department of Labor dropped its defense of the new rule, and on August 31 it was invalidated.