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Have you wondered why some employees don’t receive overtime pay? That means they are FLSA exempt. There’s more that goes into an exemption than pay, so read this article to learn more!

What Is FLSA Exempt?

FLSA exempt is a classification that falls under the federal Fair Labor Standards Act (FLSA). This act is the federal mandate for how to pay employees, which includes how to classify them as exempt or non-exempt from being entitled to overtime pay, among other things. For more information specifically about FLSA, go to Eddy’s HR Encyclopedia article here.

It is simplest and most common for employees to be classified as non-exempt (meaning they do get overtime pay). To classify someone as exempt from FLSA, employers have to ensure all of the legal qualifications are met.

Exempt vs Non-Exempt

Non-exempt employees fall under FLSA and have to be paid overtime (at least time and a half) if they work more than 40 hours in a week. There are other guidelines that have to be followed under FLSA, but the biggest one is the overtime factor. If you are interested in learning more about non-exempt employees, check out Eddy’s HR Encyclopedia article here.

Exempt employees are exempt from FLSA regulations, so they don’t earn overtime pay. An exempt employee almost always gets a salary, meaning they are paid the same amount regardless of how many hours they work (although there are a few exceptions).

What Qualifies an Employee as FLSA Exempt?

There are certain qualifications an employee must meet in order to correctly receive the exempt classification. A common misconception is that it is up to the employer to choose whether or not someone is exempt from FLSA. There are serious consequences if you inaccurately classify an employee as exempt, including paying back the overtime pay the employee was denied due to being incorrectly classified, plus fines.

If an employee meets all the qualifications to be exempt, employers can choose to leave them as non-exempt.

For an employee to be classified as exempt, they must be salaried at or above a minimum level, and their job duties must be categorized as such under FLSA.

How Pay is Given

All exempt employees must be paid a salary. However, if someone doesn’t receive a salary, it doesn’t always mean they’re an exempt employee. There are other factors that need to be accounted for.

While an hourly wage consists of compensation for each hour worked, a salary means an employee is paid a guaranteed amount for each pay period, regardless of how many hours they work. This is often referenced as an amount per pay period in an offer letter and then shown as a yearly amount.

It’s beneficial to show salary as an amount paid per pay period so as not to imply that the yearly amount will be paid regardless of whether or not the employee works the whole year.

Amount of Pay

The minimum amount of salary that must be given to an exempt employee is $684 per week, or $35,568 a year. This was set in 2020 and will go through 2022, but is subject to being changed and likely will go up with time.

Type of Work Performed

Before classifying and treating any employee as FLSA exempt, employers need to do their due diligence in confirming that the employee satisfies all tests for exemption under all applicable laws, both federal and state. This process isn’t always clear cut. These exemption tests are called FLSA exempt job duties.

What Are FLSA-Exempt Job Duties?

To be classified as exempt, a position must include certain duties. The actual job tasks must be evaluated, along with how the particular responsibilities work within the organization. Not all aspects of the three job duties described below need to be performed by the employee in order for them to become exempt, but they must fall under and be able to be proven for at least one of them.

While it would not be plausible to list all of the job tasks that fall under FLSA exempt job duties, we’ll look at the main three. To make this decision about positions in your organization, it’s important to do your own research and verify the process with appropriate counsel (e.g. an HR attorney). The three major qualities of an exempt position are executive, professional, and administrative.

Executive

The position is executive, and therefore exempt if it incorporates all three of these responsibilities.

  • Its primary duty is to manage the company
  • It supervises two or more employees
  • It includes personnel decisions (e.g. hiring and firing)

Professional

A professional position involves work requiring advanced knowledge, often gained through specialized training or a degree beyond college. Common examples of learned exempt professional job duties fall under jobs like doctors, dentists, and teachers. There are also creative professional exemptions, which can include musicians, composers, and actors.

Administrative

This exemption test is arguably the most difficult to discern. For instance, secretaries perform a wide variety of administrative duties, but typically cannot be classified as exempt. In the context of FLSA and using  regulatory language from the Department of Labor, an administrative positions’ main duty is office or non-manual work directly related to the management or business operations of the company or customers. It includes using discretion and independent judgment about issues and tasks important to the success of the organization. Some examples of job duties that fall under this exemption include accounting, quality control, and marketing.

Additional Considerations

It’s important to recognize that there are job functions that don’t quite fall into the job duties test, but still may be considered exempt in some circumstances. These require careful research, and consultation with an HR attorney is even more important in cases like these.

Outside Sales Employees

For outside sales positions, there is no salary test to be classified as exempt. A main reason behind this is that commissions often mean these positions exceed the minimum salary requirements for exempt status.

Computer Professionals

Computer professionals are in their own group when it comes to exemptions. Positions like specialized software engineers or computer programmers may be exempt; one clue is a higher pay grade.

How Does FLSA Exemption Affect HR?

Besides the research and analysis you do to classify a position as exempt or not, after that decision is made, you’ll need to administer pay and benefits a bit differently and set expectations around those policies and procedures.

Making the Choice

To reiterate what has been said previously, it is not up to an employer to classify a position as exempt. However, when a position qualifies as exempt under FLSA, you may choose to keep it as non-exempt or to change it to exempt.

There are a number of pros and cons why an employer would want an employee to be exempt.

For employees regularly working over 40 hours a week,you don’t have to pay overtime, and you can give those employees more flexibility. On the flip side, employees may expect higher pay rates for exempt positions, and you can’t adjust their paycheck based on amount of time worked or output. For some additional insights from a great article, click here.

Setting Expectations

It’s important to set expectations with exempt employees. For non-exempt employees, it can be as simple as setting hourly requirements, tracking them, and then setting performance expectations accordingly. Exempt employees prove to be a little trickier as their hours should not be tracked. Still, an employer can and should set expectations if there are business hours during which employees need to be available, what their job performance standards are, and how to meet those standards.

How and When Pay is Deducted

FLSA regulates how and when pay is subtracted from paychecks. Non-exempt employees arguably have more clear-cut guidelines, and exempt employees’ processes are a bit more complicated.

With few exceptions, the base pay of a salaried employee may not be reduced based on work performance or time spent as long as work is done. For example, a salaried employee’s base pay may not be reduced based on work output, poor job performance, or partial day absences.

However, there are certain reasons for which pay can be deducted to an extent. Here are some permissible reasons to withhold pay:

  • During the first or last week of someone’s employment (if they don’t work a full pay period)
  • Full personal day off or full sick day off if a “bona fide” plan is in place (after the leave has been exhausted)
  • Other more case-by-case basis situations (disciplinary  or major safety violation suspension for a full day

Time Off and Leaves

One HR consideration about exempt employees is how to handle paid time off and leaves. How to handle sick leave, holidays, jury duty, military leave, and other possibilities must be clearly set out in policies and procedures. For more advice about this somewhat complicated subject, see this article from the Society of Human Resources Management (SHRM).

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Questions You’ve Asked Us About FLSA Exempt

It might be too broad to say any whole industries are exempt from FLSA. However, non-employees (meaning freelance or independent contract workers) are clearly not covered under FLSA. Additionally, some truck drivers, agricultural workers, railroad workers, and other exemptions can be explored in this article. (https://hrdailyadvisor.blr.com/2020/10/27/who-is-not-covered-by-the-flsa/)

The Department of Labor enforces FLSA and provides important updates as necessary.

Mia is an HR Generalist who “fell” into HR after realizing that being a psychologist wasn’t quite the right fit. She has loved every second of it and is looking forward to many years to come. She’s amazed at how supportive the HR community is and is excited to start giving back. When she’s not studying for the aPHR, you can find Mia on the tennis court working on her serve!

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