Short answer: Exempt employees are not eligible for overtime; nonexempt employees are.
Full answer: The difference between exempt and nonexempt employees is primarily based on eligibility for overtime pay under the Fair Labor Standards Act (FLSA). Nonexempt employees must receive overtime pay at 1.5 times their regular rate for hours worked beyond 40 hours.
Exempt employees are not entitled to overtime if they meet specific salary and duties tests set by the FLSA. For example: “An administrative assistant paid hourly is likely nonexempt, while a marketing manager with a salary above the FLSA threshold who performs executive duties may be classified as exempt.”
How to Determine the Correct Classification:
Common Exempt Categories:
Legal Considerations: Misclassifying employees can result in back pay for overtime, fines, and penalties. Employers should regularly audit employee classifications to ensure compliance with FLSA rules.
Warning: Avoid Common Mistakes: Do not assume that salaried employees are automatically exempt or classify them based solely on job titles without reviewing duties and salary requirements.
General federal norm: Fair Labor Standards Act (FLSA)
State: All States
Link to legislative resource: U.S. Department of Labor (DOL)
Full answer: The difference between exempt and nonexempt employees is primarily based on eligibility for overtime pay under the Fair Labor Standards Act (FLSA). Nonexempt employees must receive overtime pay at 1.5 times their regular rate for hours worked beyond 40 hours.
Exempt employees are not entitled to overtime if they meet specific salary and duties tests set by the FLSA. For example: “An administrative assistant paid hourly is likely nonexempt, while a marketing manager with a salary above the FLSA threshold who performs executive duties may be classified as exempt.”
How to Determine the Correct Classification:
- Salary Basis Test: Exempt employees must be paid a fixed salary that meets the minimum threshold (currently $684 per week or $35,568 annually).
- Duties Test: Exempt employees must perform executive, administrative, professional, computer-related, or outside sales duties as defined by the FLSA.
- Hourly vs. Salary: Hourly employees are typically nonexempt, while salaried employees may be exempt if they pass the salary and duties tests.
Common Exempt Categories:
- Executive: Manages at least two employees and has the authority to hire or fire.
- Administrative: Performs non-manual work directly related to management policies.
- Professional: Requires advanced knowledge in a specialized field (e.g., doctors, lawyers).
Legal Considerations: Misclassifying employees can result in back pay for overtime, fines, and penalties. Employers should regularly audit employee classifications to ensure compliance with FLSA rules.
Warning: Avoid Common Mistakes: Do not assume that salaried employees are automatically exempt or classify them based solely on job titles without reviewing duties and salary requirements.
General federal norm: Fair Labor Standards Act (FLSA)
State: All States
Link to legislative resource: U.S. Department of Labor (DOL)