Determining Exempt or Nonexempt Employee Status under the Federal Labor Standards Act (FLSA)
Determining Exempt or Nonexempt Employee Status under the Federal Labor Standards Act (FLSA)
The primary determining factor for whether an employee is exempt or nonexempt under the Federal Labor Standards Act (FLSA) is their pay structure, specifically whether they are paid on an hourly basis or a salary basis. Generally, employees who are paid a salary are considered exempt, while those paid an hourly wage are nonexempt. However, other factors such as job duties, salary threshold, and specific job requirements also play crucial roles.
Key Determinants of Exempt Status
Exempt status is primarily determined by both the salary level and the job duties test. Employees must not only meet the salary threshold but also perform job duties that fall within specific criteria outlined by the Department of Labor (DOL).
Salary Level Test
To be exempt, employees must earn at least $684 per week, which is equivalent to $35,568 annually. This threshold may vary based on inflation adjustments and is subject to periodic changes. For example, as of 2020, the threshold increased to $684 per week.
Job Duty Tests
The job duties test involves evaluating an employee's specific job duties to ensure they meet the requirements for one of the exempt categories, such as professional, administrative, computer, or outside sales positions. The DOL provides detailed tests for each of these categories, which can be found on their website.
Salary Basis Test
Employees who qualify as exempt must also be paid on a salary basis, meaning their pay cannot be reduced based on the number of hours worked. However, an exception exists for certain jobs where a lower salary threshold may apply, such as doctors, lawyers, and school teachers.
Exceptions and Grey Areas
While these guidelines provide a clear framework, there are exceptions and grey areas. For instance, some professions, such as registered nurses, may be paid overtime despite being technically classified as exempt. Employers can also choose to pay extra to exempt employees for special effort, even if it does not align with the FLSA's requirements.
Empowering Employees to Determine Status
It is important for employees to ensure their status is correct, especially since exempt employees are not entitled to overtime pay, while nonexempt employees are. Here are a few steps employees can take:
Consult with HR
Often, HR departments are responsible for setting up employee payroll. Starting with them can provide valuable insights. If there is any doubt or misapprehension, directly checking the FLSA guidelines or consulting a legal professional is advisable.
Research and Verify
Employees can also research online by looking up definitions of exempt and nonexempt employees on the FLSA website or by consulting state laws. Daniel Dancu, a legal expert, advises mentioning specific legal questions along with the relevant jurisdiction to ensure accurate information.
Pay Stub Analysis
A simple way to determine if an employee is nonexempt is to check their pay stub. If they have been paid 1.5 times the hourly rate for every hour over 40 worked in a given week, they are likely nonexempt and entitled to overtime pay.
Conclusion
Understanding the distinction between exempt and nonexempt employee status is crucial for both employers and employees. This knowledge helps to ensure compliance with the FLSA and provides clarity on overtime pay entitlements. By consulting reliable sources and maintaining open communication with HR, employees can protect their rights and ensure fair compensation.