Exempt versus Non-Exempt is a classification under the Fair Labor Standards Act (FLSA) that determines whether an employee is entitled to overtime pay.
- Exempt employees are not eligible for overtime pay because they meet specific salary and job duty requirements.
- Non-exempt employees are eligible for overtime pay (typically 1.5x their regular rate) for hours worked over 40 in a workweek.
Understanding the difference is essential for proper payroll processing, legal compliance, and protecting employee rights.
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Key Facts
- Exempt Employees:
- Not entitled to overtime pay
- Paid on a salary basis
- Must meet both salary threshold (currently $684/week) and job duties test (executive, administrative, professional, or other)
- Typically have managerial or specialized roles
- Common titles include managers, accountants, software engineers, executives
- Non-Exempt Employees:
- Entitled to overtime pay for hours worked over 40/week
- Can be hourly or salaried, but hours must be tracked
- No need to meet job duties test - status is based on pay and duties
- Common in retail, customer service, clerical, food service roles
- Legal Importance: Misclassification can lead to lawsuits, fines, and back pay liabilities; the U.S. Department of Labor (DOL) enforces FLSA classification rules.
- Employer Responsibility: Employers must track hours for non-exempt workers and they must review job descriptions regularly to ensure correct classification.
1. What is the main difference between exempt and non-exempt employees?
Exempt employees do not receive overtime pay, while non-exempt employees must be paid overtime for working over 40 hours a week.
2. How do you qualify as an exempt employee?
You must earn at least $684/week (as of 2025) and perform specific job duties outlined by the FLSA.
3. Are all salaried employees exempt?
No. Salary alone doesn’t make someone exempt - they must also pass the job duties test.
4. Can non-exempt employees be salaried?
Yes, but they must still receive overtime pay and have their hours tracked.
5. What happens if an employee is misclassified?
The employer may owe back overtime pay, penalties, and could face legal action from the DOL or employees.
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