Exempt and Non-Exempt Employees

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What Is an Exempt Employee?

An exempt employee is "exempt", or excused, from the overtime pay requirements. Exempt status has little to do with the actual job description or the employee’s title, but rather focuses on the duties and responsibilities of that employee. Although the definition may vary by jurisdiction, an employee is usually exempt if they have more responsibilities than the average employee, and if they perform tasks that are more managerial in nature.

Exempt employees are not required to "punch a clock". The Fair Labor Standards Act (FLSA) does not place limits on the amount of time that an employer is allowed to require an exempt employee to work. Again, state laws may have different requirements from the FLSA.

Therefore, such employees are exempt from being paid overtime, because it is assumed that the employee is working independently and has more discretion in the execution of their tasks. For example, if the person is involved in hiring and firing duties, they will likely be classified as exempt.

Certain categories of workers are automatically listed as exempt, including administrative personnel, executives, highly skilled workers, and licensed professionals, such as doctors and engineers. Also, even if an employee is not specifically listed as exempt, they may fit into an overtime pay exemption category, based on what their daily responsibilities involve.

What Is a Non-Exempt Employee?

A non-exempt employee is one that must be paid overtime wages. They are typically referred to as hourly employees or salaried employees (although paying an employee a salary does not automatically convert them into a non-exempt worker). The federal rule generally states that hourly employees shall be paid a wage of 1.5 times their regular rate for all work performed over 40 hours within a given time frame, usually a week.

Therefore if a non-exempt employee works more than 40 hours a week, they are legally entitled to overtime pay for their extra work. Finally, the FLSA states that employees who earn less than $23,600 a year or $455 a week are non-exempt.

What Are the Differences between Exempt and Non-Exempt Employees?

Exempt or non-exempt status refers to whether an employee must be paid according to the overtime pay standards as set forth in the FLSA. According to FLSA, employees must generally pay their workers 1.5 times their normal wage for any work they put in after a 40-hour work week. However, some types of employees are "exempt" from these requirements, meaning that they are not entitled to overtime pay even if they work past 40 hours a week.

State laws also address exempt and non-exempt employees, and an individual state might have its own definition of what constitutes "overtime."

What Are the Similarities between Exempt and Non-Exempt Employees?

Below are similarities between the two:

Which Is Better?

This depends on an individual’s preference and lifestyle. Exempt employees are usually paid more since they must stay and complete their assigned work. There is also a fair amount of leeway granted to exempt employees. For example, exempt employees can ordinarily spend time taking breaks on the job, without repercussions. However, exempt employees must stay and finish their work, regardless of how many hours it takes.

On the other hand, many employees prefer to be in nonexempt positions, since they are paid for every hour they work. They are also typically only required to work the prescribed number of hours. However, most nonexempt employees are held to stricter standards for casual time. Nonexempt employees' tend to be monitored more closely with respects to breaks.

What Types of Disputes Arise over Non-Exempt or Exempt Statuses?

Neither employers nor employees are allowed to waive the overtime pay requirement. If the employer withholds a non-exempt employee’s rightful overtime wages, they may be subject to a civil lawsuit. The employee will usually be entitled to back pay for their overtime hours, and could potentially receive other types of damages in the event of a lawsuit.

Erroneously classifying an employee as exempt or non-exempt can also lead to other employment law disputes. For example, furlough (mandatory days off with no pay) is generally not allowed for exempt employees unless they work a full week, because exempt employees are typically paid for a full week’s salary. Therefore, they must be furloughed for an entire week and not just one day.

Finally, proper exempt/non-exempt classification is necessary when dealing with employee benefits such as insurance, medical care, vacation, open enrollment eligibility and other benefits. Again, these laws may vary, depending on the state.

Should I Seek Legal Advice?

An experienced employment attorney can help inform you of your rights and responsibilities as an employer. If you are an employee and have been denied your overtime pay, you should contact a lawyer immediately for advice. Be sure to keep records and accounts of the incident in question.

If you are an employer, be sure that you properly classify your employees as either exempt or non-exempt. Failure to make a proper classification could lead to legal consequences for you or your business organization.

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Last Modified: 12-30-2014 12:24 PM PST

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