ANSWER:
The terms exempt and nonexempt come from the Fair Labor Standards Act (FLSA), which is the federal law governing minimum wage and overtime pay. In a nutshell, nonexempt employees must receive at least minimum wage for every hour worked and are entitled to overtime pay for hours over 40 in a workweek. Exempt employees, on the other hand, don’t qualify for overtime under FLSA.
Now, any position can be classified as nonexempt, but to classify a position as exempt, it has to meet certain criteria laid out in the FLSA. The most common exemptions are for executive, administrative, and professional roles, often called the “white-collar” or EAP exemptions. For a position to qualify as exempt, an employee must meet all three of the following tests:
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Duties: The employee’s primary job tasks have to align with the specific duties defined for each exemption type. Each exemption—whether it’s executive, administrative, or professional—has its own set of duties criteria.
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Salary level: The employee needs to earn at least a minimum salary, which is set by the Department of Labor (DOL).
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Salary basis: The employee must be paid a consistent amount each week, regardless of hours worked or the quality of work. There are a few narrow exceptions, but generally, reducing an exempt employee’s pay isn’t allowed.
If an employee meets all three criteria, they’re typically eligible to be classified as exempt. If not, they should be classified as nonexempt and receive minimum wage and overtime pay as required.
It’s also worth noting a couple of exceptions: Teachers, practicing doctors, and lawyers don’t have to meet the salary level and basis tests to be classified as exempt. Additionally, certain computer professionals can be paid hourly if they meet the DOL’s hourly rate requirements.
This information is a general overview and doesn’t cover state or local law, so for specific guidance, it’s always best to consult with an HR professional or legal advisor.
