Exempt Versus Nonexempt Employees

Are you entitled to receive overtime pay when you work more than 40 hours per week? If you own a business, must you pay your employees at least the minimum wage? The answer to both questions depends on whether or not the employee is considered “exempt”. You have no doubt heard the terms exempt or nonexempt used in employment listings and during hiring decisions, but not everyone understands the long-term implications of which category to use.

When we say that one class of employee is “exempt” we mean that their employers do not have to adhere to the standards laid out in the Fair Labor Standards Act (FLSA) or New Jersey state laws when it comes to dealing with these employees. Among other protections for employees, the FLSA requires employers to provide at least minimum wage, and to pay them one-and-a-half times the regular pay rate for hours worked beyond the typical 40 hours in a week.

Nonexempt employees do not enjoy these protections. They receive a salary in order to accomplish their job descriptions and they bring home the same amount whether they work 10 hours a week or 100. Although nonexempt salaries are generally higher than minimum wage pay rates, there is no baseline pay required for employers. This can mean when you break down the annual salary divided across the total hours worked, nonexempt employees can actually make more money per hour.

Determining which of the two classes is most appropriate is not always clear. Failure to properly categorize an employee can lead to wage and hour claims against the business. There are numerous complicated factors that go into assessing an employees’ exemption status, but the determination considers two primary questions:

  • Does the employee meet the salary basis test? In order to be considered exempt, the employee must receive a regular salary and earn more than $455 per week.
  • Does the employee’s job meet the duties test? There are certain types of positions that are automatically exempt from the FLSA, including administrative, executive, professional, and outside sales positions. Even computer specialists are exempt under certain specific conditions.

Of course, there are several factors that can complicate the analysis. It is important to seek out experienced legal counsel to address your exemption status questions. A Monmouth County business lawyer can help you ensure that you have properly categorized the people who work for you. If you are improperly categorized and you work more than you should without the proper compensation, you should contact a seasoned Monmouth County business attorney today to determine the best way to recover your losses.