Whether you’re an employer or an employee, understanding labor laws is difficult but incredibly necessary. One of the most common points of labor law confusion is the difference between exempt and nonexempt employees. Fortunately, the differences are easy to understand, and once you know what sets them apart, you’ll be an expert!
What Is an Exempt Employee?
An exempt employee is a worker who is not eligible to receive overtime pay, as they generally receive a fixed salary for the work they perform. Employees must meet three requirements to qualify as exempt.
First, the employee must receive a salary instead of an hourly rate, and the monthly base payment must be higher than the Fair Labor Standards Act (FLSA) minimum. Additionally, the employee must earn a certain minimum per week, and the FLSA changes this minimum once a year. For example, the minimum for 2020 was approximately 680 dollars per week, and any employee that met or exceeded that minimum could be exempt. Lastly, if an employee meets the above criteria and holds a higher role that requires particular knowledge and expertise, they can be an exempt employee.
What Is a Nonexempt Employee?
Ultimately, the difference between exempt and nonexempt employees lies in whether or not they are eligible to receive overtime pay. Nonexempt employees, unlike exempt employees, are eligible for overtime pay, as they do not meet the exempt criteria. Typically, these employees receive hourly pay instead of a salary, and the paid overtime must be 1.5 times their hourly rate.
Why Does It Matter?
Misclassification is one of the most common types of wage violations in the workplace because following federal and state classification laws can be confusing. However, it is important to review FSLA classifications and read over job descriptions at least once a year. If you don’t, and you misclassify an employee, they could sue you for not giving them their required pay. Remember, just because a worker receives a salary doesn’t automatically preclude them from overtime pay. Be sure to check your state and local laws or speak with a business lawyer if you can.