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How Employees are Classified.

Exempt vs. Non-Exempt Status: How Employees are Classified.

Classification of employees is dictated by Fair Labor Standards Act (FLSA) rules. The FLSA ensures employees receive compensation for their work, guaranteeing a minimum wage as well as fair overtime pay when applicable.

A small portion of workers are “exempt” from a minimum wage or overtime as specified under federal law. When a business owner hires a new employee, exemption status must be determined. Read on to learn about the basic guidelines that determine whether a new employee requires exempt or non-exempt status.

Exempt vs. Non-Exempt

Overtime pay and timekeeping requirements differ between exempt and non-exempt employees. Non-exempt employees are entitled to overtime pay, and their employers are required by law to track and pay all earned overtime hours.

Exempt employees, on the other hand, are not entitled to overtime pay. An employer is not required to pay above the agreed-upon salary or keep track of overtime hours. This results in fewer bookkeeping requirements, making it an attractive option for employers.

How do you know whether an employee should receive exempt or non-exempt status? Primary criteria that would lead to employment classification as exempt include:

  • Employee must make a salary of no less than $684 per week
  • Employee’s duties must not include repetitive or manual tasks without creativity or decision-making power

White Collar Exemptions

There are also some FLSA exemptions that would lead to employment classification as exempt. These “white collar” exemptions are related to the employee’s job duties. If the employee’s job functions fall into the following categories, they are exempt and not entitled to overtime, and the employee must meet the salary requirement of no less than $684 per week:

  • Executive: Executives manage other employees, and management needs to be the primary duty in order to receive exempt status under this category.
  • Administrator: Generally, employees receiving exempt status under the administrator category perform work that isn’t manual in nature. The work must be linked to a business’s general operations. Common duties administrators handle include taxes, accounting, HR and database administration.
  • Professional: Two types of professionals exist under the FLSA: learned professionals and artistic professionals. Learned professionals have job duties that involve advanced knowledge, usually an advanced degree. Learned professionals work in fields like accounting, architecture, chemistry, law, medicine, teaching, theology, etc. Artistic professionals rely on creativity to work in music, writing, acting and graphic arts.
  • Outside sales: Outside sales employees work away from an employer’s place of business on a regular basis. Outside sales employees do not need to make a salary of $684 per week to be considered exempt.

Non-Compliance is Costly

As a general rule, remember the title of the job is not what is important, instead go by job function when it comes to classifying employees. In some cases, misclassification can open a business owner up to prosecution, potentially resulting in criminal charges. If you’re not 100 percent sure of the exemption status of an employee, contact an employment attorney to discuss the situation. If you need assistance with employee classification, it’s best to consult a legal expert who understands the rules and regulations pertaining to exempt vs. non-exempt employees.

Employment law is complicated, and it is important to work with an experienced employment attorney. Contact John Holden at Holden Law Firm for answers to any questions you might have regarding your employee classification or other employment law matters. John Holden provides knowledgeable, experienced legal counsel for employees and small businesses in the Twin Cities.

Call today to discuss the details of your case. This article may not be reproduced in any form without the permission of Holden Law Firm. © Copyright 2021 Holden Law Firm. All rights reserved.

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Holden Employment Law

John C. Holden

Phone: (952) 943-3960


Office: 12800 Whitewater Drive, Suite 100

Minnetonka, MN 55343

Over 30 Years of Experience

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