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Jan20

Exempt vs Non-Exempt

Can a person working 9:30am-3:30pm be classified as Exempt? Also, should they be punching out for lunch? What is the minimum amount of hours that is needed to be worked in order to be exempt?

The federal Fair Labor Standards Act (FLSA) establishes minimum wage, overtime pay, recordkeeping, and youth employment standards affecting employees in the private sector and in Federal, State, and local governments.

Under the FLSA, employees are classified as either non-exempt or exempt.

Non-exempt employees must be paid for all hours worked and are subject to overtime and minimum wage requirements prescribed by the FLSA. Most employees are considered non-exempt.

Conversely, exempt employees receive a fixed predetermined salary for any week during which work is performed regardless of the quantity or quality of such work. Exempt employees are excluded from overtime pay provisions.

It’s up to employers to determine employee classification based on FLSA guidelines.

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 $455 per week (FYI: the DOL has proposed to increase this to $970 per week) are non-exempt. There is no specific schedule or number of hours a week that an employee must work to be considered exempt.

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. 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.

An employee who doesn’t pass all three tests is considered non-exempt under the FLSA.

Whether an exempt employee is required to clock in/out for lunch is completely at the discretion of the employer. Doing so doesn’t jeopardize the exempt status as long as the amount of time taken for lunch is not deducted from the exempt employee’s salary.

This entry was posted on Wednesday, January 20th, 2016 at 3:11 pm and is filed under
Human Resources Management, Labor Laws.
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