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Jun24

Exempt/Non exempt Employees

What is the difference between an exempt and non-exempt employee?

The U.S. Department of Labor administers and enforces the Fair Labor Standards Act (FLSA) which establishes minimum wage, overtime pay, recordkeeping, and child labor standards. Under the FLSA employees are classified as non-exempt or exempt.

Non-exempt employees must receive overtime pay for hours worked over 40 in a workweek at a rate not less than time and one-half their regular rates of pay. Most employees are non-exempt.

Exempt employees are excluded from overtime pay provisions. To be exempt an employee must pass all three “tests”, salary level, salary basis, and duties, as outlined by the FLSA.

The salary level test: Employees who are paid less than $23,600 per year ($455 per week) are nonexempt.

The salary basis test: An exempt employee must receive a regular, predetermined amount of compensation each pay period on a weekly, or less frequent, basis. The predetermined amount cannot be reduced based on variations in the employee’s quantity or quality of work. Aside from a few exceptions, an employee must receive the full salary for any workweek during which the employee performs any work, regardless of the number of days or hours worked.

The duties test: An employee who meets the salary level and salary basis tests is exempt only if he/she also performs exempt job duties. The actual tasks of the job are to be evaluated, not the job title. There are three typical categories of exempt job duties titled executive, professional, and administrative.

Job duties are exempt “executive” job duties if the employee regularly supervises two or more other employees, has management as the primary duty of the position, and has some genuine input into the job status of other employees (such as hiring, firing, promotions, or assignments).

“Professionally” exempt work is predominantly intellectual, requires specialized education, and involves the exercise of discretion and judgment. Advanced degrees are the most common measure of this but are not absolutely necessary if an employee has attained a similar level of advanced education through other means and performs essentially the same kind of work as similar employees who do have advanced degrees.

“Administratively” exempt employees provide support to the operational or production employees and have a major impact on the overall business. An administratively exempt employee has the authority to create or interpret company policies, has responsibilities that directly relate to the overall business operation, has the decision making ability to make significant financial impacts, and has the authority to deviate from company policy without prior approval.

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This entry was posted on Tuesday, June 24th, 2014 at 8:04 pm and is filed under
Labor Laws.
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