Are My Employees Exempt or Nonexempt?

 Posted on October 16, 2014 in Employee Rights

While many employees may not realize its impact, the Fair Labor Standards Act (FLSA) applies to most jobs in America, mandating employers to act in accordance with the law’s requirements for both minimum wage and overtime pay. A very small percentage of jobs fall completely outside the purview of the FLSA and those under within its scope are divided into two classifications: exempt and nonexempt. It is extremely important for employers to know the difference so as to remain in compliance with the law.

Nonexempt

In most companies, the average worker is “nonexempt” meaning the FLSA standards generally apply to that individual. The employee must be paid at least the federal minimum wage for every hour he works and at least time and a half as overtime pay for any hours above 40 per workweek. Nonexempt employees typically comprise most of a company’s workforce and include general laborers, clerks, production or line workers, customer service representatives, and “inside” sales staff.

Exempt

Certain employees are considered “exempt” from FLSA requirements, and are not required to be paid for overtime. Some are exempt from minimum wage requirements as well, but exemptions from the overtime requirements are far more common. Certain professional jobs are automatically categorized as exempt, including teachers, lawyers, doctors, and “outside” sales positions. If a job is not specifically designated as exempt, its status will depend on “(a) how much they are paid, (b) how they are paid, and (c) what kind of work they do.” To be considered exempt, most employees (with certain exceptions) must make at least $23,600 annually or $455 per week, be paid based on a salary, and perform duties established by the FLSA to be exempt.

Regardless of an employee’s title or position, the FLSA requires an employer to consider the actual responsibilities of the job when determining exemption status. Further, exempt job duties must be the primary duties of the job. In most cases, exempt job duties can be divided into three categories.

• Executive: Supervisory positions with managerial responsibilities and decision making duties are usually exempt.  These may include department heads and shift managers.

• Administrative: Most front-line administrative employees are typically nonexempt, but employees who primarily handle office work related to management or business operations of the company may be exempt. To be exempt, they must also exercise independent judgment and discretion on significant matters related to “running the business.” Exempt administrative positions may include human resources staff, payroll, marketing, and quality control.

• Professional: “Learned professionals” are those whose work requires advanced knowledge and is primarily intellectual in nature. They most often require specialized education, including post-graduate degrees and/or certification. Learned professionals are almost always exempt and include educators, attorneys, and doctors. “Creative professionals” may also be exempt if their work requires invention, imagination, or talent, such as writers, actors, and artists.

The Illinois Department of Labor and FLSA provide for some computer related jobs to be exempt as well. Exempt duties of computer employees are essentially a combination of administrative and professional exempt duties as the computer work is typically a systems and support role, but requires advanced knowledge and training similar to an exempt professional. Systems analyst, software engineer, and programmer represent a few computer jobs that may qualify for exempt status.