Exempt and non-exempt are classifications under the Fair Labor Standards Act (FLSA), a federal law requiring that most employees receive at least minimum wage for each hour worked and overtime pay for hours worked over 40 in a workweek. Employees who are entitled to both minimum wage and overtime are called non-exempt, while those who are not entitled to both are called exempt.
Any position can be non-exempt, meaning that employees in that position are entitled to both minimum wage and overtime pay. If you would like to classify a position as exempt, it would need to qualify for one of the exemptions listed in the FLSA.
The most commonly used (particularly in office settings) are the executive, administrative, and professional exemptions. These are known as white collar exemptions, and employees who are properly classified this way are not entitled to minimum wage or overtime. But, to qualify, each position must pass a three-part test:
- Duties: The employee must perform specific tasks (such as managing at least two people) and regularly use their independent judgment and discretion. Each exemption has its own duties test.
- Salary level: The employee must make at least $455 per week (expected to be ~$679 per week starting around January 2020).
- Salary basis: The employee must be paid the same each week regardless of hours worked or the quantity or quality of their work. Reducing an exempt employee’s pay is only allowed in very narrow circumstances.
If a position meets all the criteria under one of the white collar exemptions, the employee may be properly classified as exempt and will not be entitled to minimum wage or overtime pay. If the position does not meet all the criteria under a specific exemption, the employee must be classified as non-exempt and paid at least minimum wage and overtime when applicable.