Exempt employee

Definition

An exempt employee is a worker who is not entitled to receive overtime pay under the Fair Labor Standards Act (FLSA) due to their specific job duties and salary level. These employees typically perform executive, administrative, or professional roles and are paid on a salary basis rather than hourly. Understanding the classification of exempt employees is crucial for both employers and employees to ensure compliance with wage and hour laws.

5 Must Know Facts For Your Next Test

1. To qualify as an exempt employee, workers must generally meet both the salary level test and the duties test as defined by the FLSA.
2. Exempt employees are typically paid a minimum salary of $684 per week (as of January 2020), which equates to $35,568 annually.
3. Common job categories for exempt employees include executive positions, administrative roles, professional jobs, outside sales, and certain computer-related occupations.
4. Employers must be careful in classifying employees as exempt; improper classification can lead to significant legal penalties and back pay for unpaid overtime.
5. Exempt status can vary by state, as some states have more stringent regulations regarding exemptions from overtime pay.

Review Questions

• What criteria must an employee meet to be classified as an exempt employee under the FLSA?
  • To be classified as an exempt employee under the FLSA, individuals must meet two main criteria: they must earn above the specified salary threshold and perform specific job duties that align with exempt categories. The salary threshold requires employees to earn at least $684 per week, while job duties typically include executive responsibilities, administrative functions, or professional tasks that require advanced knowledge or specialized skills.
• Discuss the potential consequences for an employer who improperly classifies a non-exempt employee as exempt.
  • If an employer improperly classifies a non-exempt employee as exempt, they can face serious consequences including financial penalties and legal action. The employer may be required to pay back wages for unpaid overtime, which can accumulate significantly over time. Additionally, regulatory agencies may impose fines, and repeated violations can damage the employer's reputation and lead to increased scrutiny from labor officials.
• Evaluate the implications of state laws on the classification of exempt employees compared to federal regulations.
  • State laws can create additional requirements for the classification of exempt employees beyond federal regulations set by the FLSA. Some states have established higher salary thresholds or expanded definitions of job duties that qualify for exemption. This divergence means that employers need to stay informed about both federal and state laws to ensure compliance and avoid misclassification. Understanding these implications is vital as it affects labor costs and employees' rights across different jurisdictions.

Related terms

non-exempt employee: A non-exempt employee is a worker who is entitled to receive overtime pay for hours worked over 40 in a workweek under the Fair Labor Standards Act.

Fair Labor Standards Act (FLSA): The Fair Labor Standards Act is a federal law that establishes minimum wage, overtime pay eligibility, recordkeeping, and youth employment standards for both full-time and part-time workers.

salary basis: Salary basis refers to a method of compensating an employee with a predetermined amount of money for each pay period, regardless of the number of hours worked.