Exempt & Non-Exempt Employees

Employers want to pay their workers the amount they are owed – no more, no less. But that's easier said than done under complex wage and hour laws. The federal Fair Labor Standards Act (FLSA) requires that in addition to paying at least the minimum wage you also must pay overtime to employees who work more than 40 hours in a given workweek, unless they meet certain exceptions.

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To complicate matters further, many states have wage and hour laws that may have more requirements than the FLSA. Employers must make sure they abide by both federal and state wage and hours laws to avoid legal trouble.

Nonexempt employees

Most employees are entitled to overtime pay under the FLSA. They are called nonexempt employees. You must pay them one-and-a-half times their regular rate of pay when they work more than 40 hours in a week. The biggest problem most employers have with nonexempt employees is miscalculating how much overtime workers are owed.

Exempt employees

You don't have to pay overtime to employees who are exempt from the FLSA's overtime provisions. The most common exemptions are the white-collar exemptions for administrative, executive, and professional employees, computer professionals, and outside sales employees. Many overtime mistakes occur when the employer misclassifies a nonexempt employee as exempt.

Other classifications of employees

In addition to regular nonexempt employees and exempt employees, there are several other classifications of workers. It's important to make sure that those workers actually meet the requirements for those classifications in the FLSA and your state's wage and hour laws. Other classifications include volunteers, trainees, interns, independent contractors, and temporary employees.

Other issues to consider

• Comp time. Although there are exceptions, it's usually illegal to give nonexempt employees comp time (time off) instead of paying them overtime.
• Child labor. Federal and state laws include special provisions to protect workers younger than 18. These laws can affect the type of work, wages, and hours that an employee can work.
• Breaks. Employers need to make sure they follow federal and state law requirements regarding breaks, including meal breaks, for workers.

Wage and hour law enforcement

The provisions of the FLSA are interpreted and enforced by the U.S. Department of Labor which investigates complaints and sometimes sues when it find violations. Many states also have agencies that enforce state labor laws and investigate complaints.

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Related articles on Exempt & Non-Exempt Employees from the State Employment Law Letters
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HR Tools for Exempt & Non-Exempt Employees

• HR Executive Special Report - Overtime Ins and Outs: How to Comply with the FLSA (available for purchase by nonsubscribers)
• HR Executive Special Report - Overtime Revisited: The DOL's Final Regulations (available for purchase)
  
• Sample Policy - Wage and Salary Administration
• Sample Policy - Employee Classification
• Sample Policy - Time Reporting
• Sample Policy - Overtime
• Sample Policy - Compensatory Compensation for Exempt Employees