Are you sure you know whether your employees are considered exempt or nonexempt? It's important to classify workers correctly because their status determines their eligibility to receive overtime pay. Even if you think you know the difference between exempt and nonexempt status, there are some fine points of which you may be unaware.
The Fair Labor Standards Act generally requires overtime pay for employees. However, these protections do not apply to management-level employees, who are therefore known as "exempt employees." To determine whether an employee is exempt, you need to apply certain tests to that employee's salary and job duties.
Employees who fall into this category receive a salary for the work they perform, not an hourly wage. They generally hold professional roles that require a higher level of expertise and knowledge than that of nonexempt roles. This makes exempt employees ineligible to receive overtime pay. To be classified as exempt, they also must earn a weekly base pay higher than the FLSA exempt minimum, which changes annually.
There are several types of employee exemptions:
These employees earn an hourly wage and are covered by the following FLSA provisions:
The minimum overtime wage is determined by the Department of Labor, but states generally have their own minimum wage rules. When these differ, employers must go with the minimums that are more favorable to employees.
You must classify your employees correctly or risk costly compliance violations. Note that state laws have criteria for classification, too. In general, your assessment is based on how much money employees earn, the type of work they do and their specific responsibilities and job duties.
This is just a summary of a complex series of laws and regulations. Work closely with financial and legal professionals to make sure you stay compliant.
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