Exempt vs. Nonexempt Employees: What You Need to Know

Good questions. The Fair Labor Standards Act (FLSA) is a federal law requiring that most employees receive at least minimum wage for each hour worked and overtime pay for hours worked over 40 in a workweek. Some employees, however, are not entitled to overtime, while others are not entitled to overtime or minimum wage. Employees who are entitled to both minimum wage and overtime are called nonexempt, while those who are not entitled to both are called exempt.

The FLSA lists quite a few exemptions. The most commonly used (particularly in office settings) are the executive, administrative, and professional exemptions. These are known as white collar exemptions, and employees who are properly classified this way are not entitled to minimum wage or overtime. But, to qualify, each position must pass a three-part test: 

1. Duties: The employee must perform specific tasks (such as managing at least two people) and regularly use their independent judgment and discretion. Each exemption has its own duties test.
2. Salary level: The employee must make at least $844 per week.
3. Salary basis: The employee must be paid the same each week regardless of hours worked or the quantity or quality of their work. Reducing an exempt employee’s pay is only allowed in very narrow circumstances.

If an employee meets all the criteria under one of the white collar exemptions, the employee may be properly classified as exempt and will not be entitled to minimum wage or overtime pay. If the employee does not meet all the criteria under a specific exemption, they must be classified as nonexempt, and paid at least minimum wage and overtime when applicable.  

This Q&A does not constitute legal advice and does not address state or local law.