Are my employees exempt or non-exempt?
Under the federal Fair Labor Standards Act (FLSA) and state wage and hour law employers must classify all employees as either exempt or nonexempt. This classification determines how the employee should be paid to ensure legal compliance. As the name implies, exempt employees are exempt from the overtime provisions of state and federal law and are expected to devote the number of hours necessary to complete their respective tasks. The compensation of an exempt employee does not change based upon the number of hours worked because exempt employees are paid for getting the job done. By contrast, nonexempt employees must be paid overtime if they work more than forty hours per workweek, giving employers an incentive to track the hours of nonexempt employees and to keep these employees’ hours down.
Among the most widespread wage and hour mistakes employers make is misclassifying employees as exempt and therefore not tracking time or paying overtime. Simply paying an employee a “salary” does not make his/her position exempt.
The most common FLSA overtime exemptions – often called the “white collar” exemptions – are:
- the executive exemption
- the administrative exemption
- the professional exemption
- the outside sales exemption
- the computer exemption
The Department of Labor has implemented a test to determine proper classification under each exemption.
Misclassification of employees as exempt can be a very expensive mistake, potentially resulting in government investigations, penalties and costly lawsuits. In a typical wage and hour lawsuit a non-prevailing employer will end up paying back wages plus damages equal to the amount of the back wages, fees to an attorney to represent them as well as the aggrieved employees’ attorney’s fees.
Employers should consult with experienced human resources professionals and/or labor and employment counsel when in doubt about the appropriateness of employee classifications under the FLSA and state wage and hour law. For MEA Members, the Hotline and a Member Legal Services attorney are available to provide this assistance. In addition, this topic is discussed in more detail in the “Wage & Hour Laws” Knowledge Guide available in Member Tools.
About the Author
Amy McAndrew is MEA’s Director of Member Legal Services and has over twenty years of experience as a labor and employment attorney.