What Is an Exempt Employee?

The Fair Labor Standards Act (FLSA) is a federal law passed in 1938 that regulates the minimum wage and overtime pay for workers, overtime pay, and the workweek. It also governs the employment of many common employees, including those who work for a state or local government. Employees in the exempt category are not entitled to the minimum wage or overtime pay and may be allowed to work a “part-time” schedule (like 40 hours per week) and still be considered exempt.


Exempt employees or those who are “exempt” from the Fair Labor Standards Act (FLSA) are those who do not have to be paid overtime or minimum wage. Exempt employees that work 20 hours or more a week are eligible to be paid overtime; employers that pay overtime are required to pay employers who pay overtime a minimum of time-and-a-half for all hours worked over 40 hours in a workweek.


Types of Exempt Employees


The FLSA recognizes the following categories of exempt workers:

  • Professional
  • Executive
  • Administrative
  • Outside Sales
  • Computer related


These categories are purposefully extended to encompass numerous types of jobs. The Fair Labor Standards Act guarantees non-exempt workers one and one-half times the normal pay scale for overtime worked in a given work period.


FLSA Standards and Exemptions


Although the Fair Labor Standards Act has been around since 1938 and was recognized as a national law, it was not until the 1950s that the federal government began to enforce the provisions of the Act. In 1962 it was made clear that employers are required to pay employees for all of the time they perform eligible work.


In recent years, the debate surrounding the FLSA has been hot and heavy, with the public and the media clamoring for more regulation of the minimum wage, overtime pay, and how tips are handled. The FLSA has been in place since 1938 and has become a powerful tool in changing the American work culture, allowing millions of people to earn a living wage and provide for themselves and their families.


Taxation and Exempt Employees: Is There a Difference?


Exempt employees are not entitled to minimum wage, they are entitled to overtime compensation. Exempt employees are usually office workers, performers, and professionals.


The Fair Labor Standards Act (FLSA) defines two different types of employment: exempt employees and non-exempt employees. Both of these types of employees may qualify for overtime pay. However, there are some situations where exempt employees don’t qualify for overtime. For example, an exempt employee is one who makes less than $455 per week ($23,660 per year) or $23,660 a year, whichever is greater.


Exempt vs. Non-Exempt Employees


Contrary to popular belief, most employees are not covered under the Fair Labor Standards Act or FLSA. This means many people receive less pay for the work they do than they should, and many receive no pay at all. The FLSA is a federal law that covers employees who work in certain industries, such as entertainment and food service, and stipulates that they must be paid at least the federal minimum wage and overtime, as well as receive “time-and-a-half” when they work more than 40 hours a week. However, employers can request that certain categories of employees be covered by the FLSA, such as employees in executive positions, administrative employees, and all employees who make over a yearly salary threshold.


To know more about exempt employees, attend the Compliance Prime webinar. The webinar will also include topics like job duties test, bonus rule, examining the latest from DOL on upgrading salary level tests for exempt employees, and more. 

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