Classifying an Exempt Employee

exempt employeeWhat is an exempt employee?  I get this question time and again from my Clients.  Most of the time that question is followed up with, “Well, I pay him a salary so he is exempt.”

Who Are Exempt Employees?

What does this title of “Exempt” mean?  What are they exempt from anyway? Well, exempt is not a description of someone who is paid a salary.  In reality, just because you pay someone a salary does NOT mean they are exempt from overtime.  The definition of an exempt employee is someone who is paid on a salary basis and whose job description exempts them from the Fair Labor Standards Act requirements of minimum wage and payment of overtime. To qualify for exemption, an employee has to meet certain requirements related to their job duties, and in most states must be paid at least $455 per week.

See also: Classifying an Exempt Employee

Exempt Employee Criteria

The Department of Labor (DOL) classifies four broad categories of exempt-level employees:  Executive, Administrative, Professional, and Computer.  Does this mean that my Executive Administrative Assistant can be paid a salary because her job title contains two of the words above?  Unfortunately, the answer to that question is usually no.  There are certain tests and criteria within each category that must be met in order for an employee to be categorized as an exempt employee.  If your employees do not meet the criteria outlined by the Department of Labor under the Fair Labor Standards Act, then you should always track their hours and pay them overtime.

See also: HR Tip of the Week- Changes to Exempt Classification Could Be Coming

Misclassifying Exempt Employees

If you categorize someone as an exempt-level employee when they do not meet the criteria, it can lead to labor audits.  If the Department of Labor finds that you were not tracking hours and paying overtime appropriately to your employees, then you can be fined and forced to pay back wages owed to current and/or former employees.  Without a paper trail showing when and how much employees worked, the DOL can assign the compensation amount they feel is fair to be paid by you.   Information about exempt vs. non-exempt employees can be found by visiting the Department of Labor’s website at:  http://www.dol.gov/whd/regs/compliance/fairpay/fs17a_overview.pdf.

As always, if you have any questions at all please contact us…we are here to help!

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