What is an exempt employee?
An exempt employee is a worker who is not guaranteed overtime pay or minimum wage under the Fair Labor Standards Act (FLSA). The FLSA is an important piece of worker protection legislation that provides a variety of different rights to workers. A few rights under the FLSA include the right to be paid at or above a minimum base level of pay and the right to receive time and a half for hours worked over 40 per week. However, the FLSA also recognizes that certain employees should not be provided with guaranteed overtime or minimum wage. These employees fill special roles or have certain responsibilities and privileges, so they give up the right to guaranteed overtime because of these perks. To ensure that the FLSA did not impose an additional burden on employers to compensate these employees in a manner outside of their negotiated work agreement, the FLSA categorized certain employees as exempt.
Exempt Employees Under FLSA
FLSA section 13(a) provides a detailed list of the requirements that must be fulfilled before an employee may be classified as exempt. These requirements are in place, in part, to ensure that employers do not incorrectly classify non-exempt workers in order to avoid compliance with wage and hour laws. Under this FLSA section, different categories have been created to cover a variety of different employees who may not be entitled to overtime. For instance, exemptions may cover executives, administrative workers, creative or other professionals, outside sales people and highly compensated employees.
A job title or classification alone is not enough to make an employee exempt. Further, the fact that an employee is salaried instead of paid based on an hourly wage is also not enough to automatically classify the employee as exempt, although this is a common misconception. Instead, when determining how a worker should be classified, the FLSA indicates that employers should consider the actual circumstances surrounding the employment and the job duties performed. Guidelines published by the Department of Labor provide information on what duties a worker must have in order to fit into a particular exemption. Employers should use this information to ensure correct classification.
Exempt Employee Types
There are three main types of exempt employees. To fall under the executive exemption, for instance, the employee must be paid a salary instead of an hourly wage. The employee must also be vested with the primary duty of managing either the business enterprise or a subdivision or department thereof. The executive must regularly and customarily control or direct at least two other employees. He or she must also have authority to hire, fire or promote employees, or have a great deal of input into the hiring, firing, and promotion of workers.
To be considered exempt based on administrative exemptions, employees must receive a salary just as executives do. However, a different duty test is in place. For this category of exemptions, the employee must have the primary job of performing non-manual labor or office work. The worker must have discretion in how his or her work duties are performed and must be given the opportunity to express independent judgment at work, rather than just following orders.
To fall within a professional exemption, the employee again must be salaried. The worker must also perform work that is primarily intellectual in nature and that allows for the exercise of independent judgment and discretion. Work considered sufficiently intellectual is generally work that requires advanced knowledge obtained through prolonged education. The fields normally considered intellectual include the fields of science and learning, although there is also a special exemption for creative professionals who perform work that requires advanced talent or skill in creative and/or artist endeavors.
Computer Employee Exemptions
Computer employees must perform advanced-level work with computers for which they are paid a salary in order to be considered exempt. Computer systems analysts, programmers, and engineers are some examples of computer professionals typically considered exempt. Outside sales employees must have a primary obligation to sell. The employee must also be away from the normal place of business regularly.
Exemptions for Highly Compensated Employees
Finally, any employee who is highly compensated for his work and who performs one or more duties of a professional, executive or administrative employee may be considered exempt from overtime. The threshold limit that an employee must meet or exceed to be considered highly compensated is subject to change, but generally exceeds $100,000 annually.
Exempt Employees vs. Non-Exempt Employees
Certain employees may meet some of the criteria necessary to be considered exempt, but the Department of Labor and FLSA have established that they should not be considered exempt despite this. For instance, police, correctional officers, paramedics, fire fighters and other first responders are not considered exempt from FLSA overtime and minimum wage protections. This is true regardless of the salary earned by these individuals. Workers in positions defined as "blue collar," which includes non-management employees who perform work requiring physical skill or manual repetition, are also not exempt, regardless of salary.
Other Rules About Employee Exemption
Different states may have established their own specific guidelines for applying FLSA rules. Parties engaged in collective bargaining may also establish their own requirements. However, in every case, those standards must not establish broader exemptions than those set forth by the FLSA and must not take away worker protections granted by the FLSA to non-exempt employees. In other words, employees not considered exempt by the FLSA must always be paid the prevailing minimum wage as well as time and a half for overtime work performed.