Status Classification: Exempt vs Non-exempt

This topic will help you understand the current overtime exemptions, the nature of the claims asserted by plaintiffs, and common areas of focus and arguments advanced by plaintiffs' counsel and the Department of Labor. It will also explain what steps you can take to assure proper classification and minimize the likelihood and success of these misclassification claims.

The differences between exempt employees and non-exempt employees can cause a lot of confusion for both workers and employers. Whether or not you are entitled to minimum wage and/or overtime pay for working more than 40 hours per week depends on your exemption status, as governed by the federal Fair Labor Standards Act (FLSA).

Non-Exempt Employee vs Exempt Employee

a) Definition of Non-exempt employee- Most employees are entitled to overtime pay under the Fair Labor Standards Act. They are called non-exempt employees. Employers must pay them one-and-a-half times their regular rate of pay when they work more than 40 hours in a week. The biggest problem most employers have with non-exempt employees is miscalculating how much overtime workers are owed.

A non-exempt employee must be paid the minimum wage and overtime pay for any time worked beyond 40 hours in a given week. Under FLSA rules, non exempt employees are entitled to time and one-half of their regular pay rates for each hour of overtime. Non-exempt employees mistakenly treated as exempt employees, or whose "off-the-clock" hours are not properly recorded and compensated, may file FLSA overtime claims with the U.S. Department of Labor.

Most workers, particularly those working an hourly wage, are in fact non-exempt employees.

b) Definition of exempt employee- The Fair Labor Standards Act contains dozens of exemptions under which specific categories of employers and employees are exempted from overtime requirements. The most common exemptions are the white-collar exemptions for administrative, executive, and professional employees, computer professionals, and outside sales employees. There is an also a lesser known exemption for certain retail or service organizations. The primary advantages of classifying employees as exempt are that you don’t have to track their hours or pay them overtime, no matter how many hours they work.

Obviously, this is an appealing scenario for employers. However, exemptions from the overtime requirements of the FLSA are just those exceptions to the rule. They are very narrowly construed, and as the employer, you will always bear the burden of proving that you have correctly classified an employee as exempt.

Understanding of the FLSA exemption categories and how to apply them including:

• Executive Exemption: what is management and how many employees must the executive supervise

• Administrative Exemption: what is management or general business operations and what is discretion and independent judgment

• Professional Exemption: who is a learned professional and who is a creative professional

• Computer Employee Exemption: what makes certain of computer professionals exempt and how is their salary test different

• Outside Sales Exemption: what are the requirements and how much do they have to be paid

• Highly Compensated Employees: how does their salary get calculated

• Other exemption rules: who is automatically covered and who is excluded by rule

Register yourself for this interactive webinar now - Status Classification: Exempt vs Non-exempt