Determining if an Employee is Exempt or Non-Exempt

The Fair Labor Standards Act is a U.S. federal statute that guarantees a national minimum wage, extra pay for overtime in certain jobs, and protection against “oppressive child labor”.  Generally, any employer who has sales or business of over $500,000 a year meets the commerce requirements of the FLSA, and therefore must abide by the minimum wage, overtime, and record-keeping requirements for non-exempt workers.

However, there are several exemptions to meeting these requirements, mainly applied to white-collar workers.

There are five types of exemptions: 

1. Executive Exemption:
The employee’s primary duty must be management of a department.  That employee must also be able to hire and fire other employees.

2. Administrative Exemption:
The employee must primarily perform office work.

3. Professional Exemption:
The employee must have advanced knowledge in a field or science or subject that required many years of school.

4. Computer Employee Exemption:
The employee has to be a systems analyst, programmer, or software engineer.

5. Outside Sales Exemption:
The employee must primarily be a sales maker or order collector, and be outside the company office regularly. 

No matter the type of exemption, the following must also be true for an employee to meet the requirements for exemption:

• All types of exemptions except for outside sales require a $455 minimum weekly salary as a prerequisite for exemption.  
• Exempt employees must be paid on a salary basis.  They must also be paid more than $455 per week, or $27.63 per hour if they are computer employees.  The pay must also be predetermined before each pay period, and they must be paid if they perform any work during that period.

Laws on this topic may vary from state to state. This content is not meant to provide you with complete information and it is not intended to be legal or tax advice. It is recommended that you consult with your own attorney, accountant or other advisor regarding your specific situation.