Common customer question #1: What is the difference between an exempt employee and a non-exempt employee? “Exempt” and “non-exempt” are employee classifications under the Fair Labor Standards Act (FLSA)—a federal law dating back to 1938 that requires certain employees to receive minimum wage and overtime pay. An exempt employee is exempt from these requirements.
The FLSA lists a number of exemption categories. The most commonly used are the executive, administrative, professional, computer, outside sales, and highly compensated employee exemptions. These are collectively known as the “white collar” exemptions.
Most of these exemptions require that the job pass a three-part test:
1. Duties: The employee has to do specific things regularly, such as use independent judgement or manage at least two people. Each exemption has its own duties test.
2. Salary level: A minimum salary must be earned; currently $23,660, but this is almost certain to go up considerably in the next few months.
3. Salary basis: The employee is paid the same each week regardless of hours worked or the quantity or quality of their work.
If an employee meets all of the criteria under at least one of the FLSA’s exemptions, the employee qualifies as “exempt” and is not eligible for overtime pay. If the employee does not meet all of the criteria under one of these specific exemptions, they must be classified as “non-exempt,” and given overtime pay when applicable.