Introduction
When it comes to employment classifications, one of the most common questions employers and employees face is: Are salary employees exempt or non-exempt? This distinction is crucial because it determines eligibility for overtime pay, as well as other labor law protections under the Fair Labor Standards Act (FLSA). Misclassifying employees can lead to legal troubles and financial penalties for employers, while employees might miss out on wages they rightfully deserve.
In this guide, we’ll break down the key differences between exempt and non-exempt employees, the factors that determine classification, and what it means for salary workers.
What Does Exempt vs. Non-Exempt Mean?
Before diving into salary considerations, let’s define the two classifications:
Exempt Employees
- Not entitled to overtime pay under the FLSA.
- Paid a fixed salary regardless of hours worked.
- Must meet specific job duty criteria set by the FLSA.
Non-Exempt Employees
- Eligible for overtime pay (1.5 times their regular pay for hours worked over 40 per week).
- Can be paid hourly or on a salary basis.
- Job duties and earnings must comply with FLSA regulations.
How Salary Ties into Exemption Status
A common misconception is that all salaried employees are automatically exempt from overtime. However, this is not always the case. Salary is just one factor in determining exemption status. The FLSA uses three primary tests to determine if an employee is truly exempt:
1. Salary Level Test
As of 2024, an employee must earn at least $684 per week ($35,568 annually) to qualify as exempt. If their salary falls below this threshold, they are non-exempt and entitled to overtime.
2. Salary Basis Test
To be considered exempt, an employee must receive a predetermined and fixed salary that does not fluctuate based on the number of hours worked.
3. Job Duties Test
Salary alone isn’t enough—employees must also perform specific job duties that fall under an exempt category. Common exempt classifications include:
- Executive Exemption: Primary duties involve managing a department or supervising employees.
- Administrative Exemption: Involves office work related to business operations with significant decision-making responsibilities.
- Professional Exemption: Applies to employees with specialized education (e.g., lawyers, doctors, engineers).
- Computer Employee Exemption: Includes IT professionals and software engineers meeting certain criteria.
- Outside Sales Exemption: Employees who regularly work away from the office making sales.
Can Salaried Employees Be Non-Exempt?
Yes! Not all salaried employees are exempt. If a salaried employee earns less than $684 per week or doesn’t meet the job duties test, they are non-exempt and must receive overtime pay.
For example:
- A bookkeeper earning $650 per week (below the salary threshold) must be classified as non-exempt.
- A customer service representative paid $800 per week but whose job duties don’t fit any FLSA exemption must still be treated as non-exempt.
Why Proper Classification Matters
Misclassifying employees can have serious consequences for businesses, including:
- Lawsuits and legal penalties from the Department of Labor.
- Back pay requirements for unpaid overtime wages.
- Loss of employee trust and morale due to wage disputes.
How to Determine Your Classification
If you’re unsure about your classification, consider the following steps:
- Check your salary – Does it meet the $684 weekly threshold?
- Review your job duties – Do they align with an exempt category?
- Look at your pay structure – Is your salary guaranteed, or does it fluctuate based on hours worked?
- Consult HR or legal experts – If in doubt, seek guidance to ensure compliance with labor laws.
Conclusion
Understanding whether a salaried employee is exempt or non-exempt is essential for both employees and employers. Just because someone is paid a salary does not automatically mean they are exempt—factors like salary level, job duties, and pay structure all play a role.
For employees, proper classification ensures fair pay and overtime eligibility. For employers, it helps avoid legal and financial repercussions. If you’re unsure about your status, reviewing the FLSA guidelines or consulting a labor law professional can help.
Have questions about your employment classification? Consult with your HR department or a labor law expert to ensure you’re being compensated correctly.
Andre Cuevas provides career insights, job search strategies, and professional advice to help individuals navigate the job market and achieve their career goals.
