Exempt Employee: Definition and Explanation
An exempt employee is a worker who is excluded from the wage and hour protections outlined in the Fair Labor Standards Act (FLSA). These employees are typically paid on a salary basis and are not entitled to overtime compensation or minimum wage guarantees under federal law, provided they meet specific criteria related to their earnings and job responsibilities.
Understanding Exempt vs. Non-Exempt Employees
The terms “exempt” and “non-exempt” are often used interchangeably with “salaried” and “hourly”, though the distinction is legal rather than simply how someone is paid. Exempt employees earn a set salary that doesn’t change based on the number of hours worked during a pay period.
In contrast, non-exempt employees are generally paid by the hour and are entitled to overtime pay for any hours worked beyond 40 in a week, according to FLSA rules.
Examples of Exempt Positions
To qualify as exempt, a worker must generally meet the FLSA exemption tests, which include a minimum salary threshold and specific job duties. Common exempt roles include:
- Managers and supervisors who oversee at least two other employees and have authority in hiring or disciplinary decisions
- Highly educated professionals, such as doctors, attorneys, architects, and teachers
- Administrative employees with decision-making authority or who perform work directly related to business operations
- Executives who manage departments or the entire organization
Tools like Beyond can help employers determine exemption status and manage compensation accordingly, helping to ensure compliance with federal and state labor laws.
Correctly classifying employees is crucial to avoid legal issues related to wage and hour violations. Employers should carefully review both job duties and salary levels when deciding whether an employee qualifies for exempt status.