1. Money
You can opt-out at any time. Please refer to our privacy policy for contact information.

What is the Difference Between Exempt and Non-Exempt Employees?


High Flying Executive in City apartment
Michael Blann/ Stone/ Getty images
Question: What is the Difference Between Exempt and Non-Exempt Employees?

The terms "exempt" and "non-exempt" refer to job classifications of employees and the exemption of certain job classifications from overtime pay and minimum wage requirements. The Fair Labor Standards Act, administered by the Wage and Hour Division of the U.S. Department of Labor, requires that all U.S. employees be paid at least minimum wage and receive overtime for work performed in excess of 40 hours during a work week.

Most employees are non-exempt, and the federal government assumes that an employee is non-exempt unless you can provide proof otherwise. But the law allows for some employees to be exempt from receiving overtime or being paid minimum wage.

What types of employees are exempt?
The FLSA states that employees employed as "bona fide executive, administrative, professional and outside sales employees" and "certain computer employees" may be considered exempt from both minimum wage and overtime pay.

What are the qualifications for being classified as exempt?
To qualify for exemption, employees generally must meet certain tests regarding their job duties and be paid on a salary basis at not less than $455 a week. Job titles do not determine exempt status, so just calling someone a manager does not work to make them exempt.

There are very specific criteria for each type of exempt job classification. For example, for an administrative employee to be classified as non-exempt:

  • The employee's primary duty must be the performance of office or non-manual work directly related to the management or general business operations of the employer or the employer's customers, and
  • The employee's primary duty includes the exercise of discretion and independent judgment with respect to matters of significance.
A professional employee must be doing work that requires advanced knowledge, which is intellectual, and it must be in a field of science or learning, acquired by "a prolonged course of specialized intellectual instruction" (that is, not just college education, but an advanced degree).

How do employees get classified as exempt?
This is one of those circumstances where it's a good idea to have some outside help. You can probably figure out who is an executive in your company, but how about an administrative assistant? Is this person exempt? (Probably not.) The issue must be decided on a case-by-case basis. A human resources professional can help you sort out this question.

Sorting Out Confusing Payroll Terms

©2014 About.com. All rights reserved.