Exempt and Non-exempt Employees

With many different classifications of employees, HR professionals need to understand the key differences between exempt and Non-exempt employees. Although these two types of employees are similar, specific provisions in US Fair Labor Standards Act (FLSA), apply to one but not the other. An HR professional must understand the differences in applicable requirements to avoid violating laws and regulations like child labor laws or record-keeping provisions.

Exempt Employees

Exempt employees are those that are exempt from the minimum wage and overtime provisions in the FLSA, meaning they do not have to be paid minimum wage or overtime. An employee must meet all three criteria or "tests'' to be considered exempt.

The employee must:

• Earn more than $684 per week
• Be salaried—that is, not paid on an hourly basis
• Perform certain exempt duties as part of their job

Non-Exempt Employees (must be paid minimum wage)

Non-exempt employees are not exempt from the FLSA’s minimum wage and overtime pay requirements. This means that non-exempt employees must be paid at least the federally mandated minimum wage. They must also be paid at least 1.5 times their regular rates of pay after 40 hours in a workweek. However, it does not limit the number of hours that employees aged 16 and older may work in any workweek. It also does not require overtime pay for work on Saturdays, Sundays, holidays, or regular days of rest, unless overtime is worked on such days. Most, but not all, workers who are paid by the hour are non-exempt employees.

Record Keeping for Non-exempt Employees

The FSLA requires employers to keep records of wages paid, hours worked, and other relevant data for each non-exempt employee. For these employees, the following records must be retained for at least three years:

• Personal information, including employee's name, home address, Social Security number, occupation, gender, and birth date if under 19 years of age
• Hour and day when the workweek begins
• Total hours worked each workday and each workweek
• Total daily or weekly straight-time earnings
• Regular hourly pay rate for any week when overtime is worked
• Total overtime pay for the workweek
• Deductions from or additions to wages
• Total wages paid each pay period
• Date of payment and pay period covered

The FLSA sets basic minimum wage and overtime pay standards and regulates the employment of minors, but there are many employment practices which the FLSA does not regulate or require. These include:

• Vacation, holiday, severance, or sick pay
• Meal or rest periods, holidays off, or vacations
• Premium pay for weekend or holiday work
• Pay raises or fringe benefits
• Procedures for discharging an employee, or immediate payment of final wages to terminated employees

Exceptions

Some exceptions to the 40-hours-per-week standard may apply,? under special circumstances, to police officers and firefighters employed by public agencies, along with employees of hospitals and nursing homes. For unclear reasons, jobs that are exempt from overtime requirements include auto mechanics, cab drivers, railroad and airline workers, television and radio announcers, and employees of movie theaters.?

Also, employees who earn at least $30 a month in tips, such as waitstaff, cab drivers, service employees, etc., do not have to be paid minimum wage. Employers must pay these workers at least $2.13 an hour and must show proof that these workers receive at least the applicable minimum wage when direct wages and the tips are combined. Other exemptions apply to people under the age of 20, students, and some workers whose earnings and productive capacity is impaired by a physical or mental disability.??

Employees who are paid by the hour can still be exempt if they earn more than $107,432 per? year. Different rules determine whether or not an employee performs exempt job duties. The most common are called white-collar exemptions. White collar exemptions apply to employees whose duties are considered administrative, executive, or professional. The professional category includes doctors, lawyers, teachers, and similar professions.?

Child Labor

The FLSA strictly regulates child labor, but it does make a clear distinction between farm jobs and nonagricultural jobs.?

For nonagricultural jobs, such as working in a movie theater, grocery store, or clothing store, the critical cutoff age is 18. People 18 or older may work at any job, whether hazardous or not, for unlimited hours. Minors who are 16 and 17 may work at any nonhazardous job for unlimited hours, such as bagging or carrying out customer’s orders, cleaning fruits and vegetables, pumping gas, etc.. Minors aged 14 and 15 may work outside of school hours in a limited number of nonhazardous jobs for a limited period each week. Minors under the age of 14 are not allowed to do nonagricultural work, with the exceptions of newspaper delivery, acting in radio, television, movies, or live theater, and working for their parents in a family-owned nonhazardous business.?

For farm jobs, the critical cutoff age is 16. Anyone 16 or older may work any farm job, whether hazardous or not, for unlimited hours, such as operating or working most farm equipment, working on a ladder or scaffolding at a height over 20 feet, handling or applying toxic agricultural chemicals, etc.? Minors aged 14 and 15 may work at any nonhazardous farm job outside of school hours. Minors aged 12 or 13 years may work nonhazardous farm jobs with a parent’s written consent or on the same farm as the parent(s). Minors under the age of 12 may perform farm jobs with a parent’s written consent, outside of school hours in a nonhazardous job, on farms not covered by minimum wage requirements. Minors of any age may be employed by their parents in any occupation on a farm owned or operated by their parents.?

Conclusion

Regardless of which employee is hired, HR professionals must know which employees are exempt and which are not. The provisions in the FSLA that apply to exempt employees differ from non-exempt employees. Due to these differences, HR professionals could easily violate the applicable provisions without proper knowledge.