Overtime Exempt Employee vs Non-Exempt Employee
March 1, 2010
I’ve been an exempt employee ever since my first job out of college. For a long time I didn’t really know the details about the labor laws behind exempt vs non-exempt; all I knew is that it meant I wasn’t paid overtime wages for all the late nights and long weekends that I worked.
Once we started a family I became less and less satisfied as a salaried employee, consistently working long hours without overtime pay in the hopes that someday I’d get a promotion. The late nights at work stopped seeming like a challenge and instead became time away from our new baby and my stressed out wife.
I started searching for a new job and after a relatively short job hunt I was able to find a company that offered a much improved work situation than the one I was in. I couldn’t belive my ears in the interview when they told me that it was a salaried position but also paid overtime for any hours worked over 40 a week! At that point I went home and did a little research on the exempt vs non-exempt topic.
Fair Labor Standards Act
The Fair Labor Stanards Acto (FLSA) is a federal law that determines minimum wage and overtime pay guidlines and is enforced by the Wage and Hour Division of the U.S. Department of Labor.
The FLSA allows employers to exempt employees from certain parts of the Act; for example, minimum wage and overtime pay regulations. This is where the term exempt and non-exempt comes from, certain types of jobs are exempt from some of the rules laid out in the FLSA.
So how do companies determine which of their employees can be considered exempt? Although there was general language describing who is exempt in Section 13 (a)(1) of the FLSA, it wasn’t specific enough for the Department of Labor as they tried to enforce the Act so Congress more provided more detail with 29 CFR Part 541.
The main determining factors for whether you’re exempt has to do with the specific tasks that you do in your job and how those full under 29 CFR Part 541. They also look at whether you’re hourly or salaried and the level of your salary for the work you do. The typical exemptions have become known as “white collar” exemptions and cover people in these roles:
- Computer Employees
- Outside Sales
Clear as mud, right? I guess that’s why corporations pay human resources specialists the big bucks to interpret the laws around FLSA and determine who is exempt. There is an additional exemption for “highly compensated” employees who are paid at least $100,000 a year. I guess they figured if you earning that much then you don’t need to be paid overtime : )
Benefit of Being Exempt
One of the benefits of being an exempt employee is that your company is supposed to pay your salary even if they don’t have work for you to do:
“If the employee is ready, willing and ble to work, deductions may not be made for time when work is not available.” – Salary Basis
I’m not familiar with all the labor laws but if weeks went by and my employer didn’t have any work for me then I’d start worrying that my job might get cut. However, for cases where you’re in between projects or clients and don’t have much to do for a week, if you’re an exempt employee then you still get paid your agreed upon salary.
Non Exempt Employees
So who are non-exempt employees? The simplest answer is obviously anyone who doesn’t qualify for exemption under the terms described in the previous section.
Most of the time, jobs for non-exempt employees are hourly positions and typically follow a routine, with set standards and rules. If you’re a non-exempt employee then you should be paid overtime, which is generally one and one-half the your regular pay rate for all hours worked over 40 in a week. State law takes precedence over the federal law if it benefits the employee, so be sure to check your state employment laws to see what overtime rates should be.
As I mentioned earlier, in my current job I’m classified as an exempt employee. However, the human resources department actually created a type of hybrid situation where my job title was also eligible for overtime pay.
It turns out I wasn’t required to work the late nights and long weekends necessary in my old job so I didn’t see any increase in pay from this policy when I started with the company. This was fine with me because my whole point in quitting my job and getting a new one was to spend more time with my family.
Just last week, I found out that human resources had done a study of other companies and job titles in our industry and determined that making my group eligible for overtime pay wasn’t necessary. So the policy will be be changing in the future and I’ll no longer be a hybrid, exempt employee that gets paid overtime. However, it’s something to keep in mind as you look for jobs. It may not be widespread but there could be other jobs out there where you can have your cake (salaried employee) and eat it too (get paid overtime if you work more than 40 hours a week).
Hopefully this look at exempt vs non-exempt employees has been useful and I hope that no matter your job classification you don’t have to work overtime!
All posts by Ben Edwards