Non-exempt and exempt employees
Non-exempt employees are classified differently from exempt employees. Administrators must pay close attention to the classifications assigned to an employee, as there are potential consequences for incorrectly classifying employees.
The Federal Labor Standards Act, or FLSA, classifies employees as either exempt or non-exempt from earning overtime for hours worked. To qualify as exempt, an employee must pass three tests:
- Salary-level test: Employers must pay employees at least the current minimum salary per week.
- Salary-basis test: Employer must pay employees their full salary in any week they perform work, regardless of the quality or the quantity of the work.
- Duties test: The employee's duties must meet certain criteria.
When classifying an employee, the worker's responsibilities and method of payment are the primary determiners. Additionally, employees who perform manual, physical, service, or skilled duties, are almost always non-exempt, and are therefore entitled to both overtime and minimum wage.
Meeting non-federal minimum salary requirements
Employers will need to meet to the minimum salary requirement that most favors the employee. For example, if the California's minimum salary requirement is higher than the federal minimum, California-based employees will need to comply with the California state minimum in order to be considered exempt.
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