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HR Insights with Ali: Exempt vs. Non-exempt: Why Proper Employee Classification is Vital

Posted on 12/13/2016 by Ali Oromchian, Esq.
No matter what you might want to believe, employers - yes, even good employers like you - can and do get into hot water with the Department of Labor all the time. One common issue: Are your workers exempt or non-exempt, or do you employ a mixture of both?

What, exactly, does it mean for an employee to be exempt?
Remember that in this context, exempt (or non-exempt) refers to whether an employee is exempt from FLSA regulations - most notably, the requirement that the employee be paid overtime wages for any hours over 40 worked each week (or over the daily overtime limit if your state is one which implements daily overtime rules). Misclassifying an employee is more than simply unfair to your employee - it is dangerous for your business. Misclassification can lead to penalties and back wage payment requirements, not to mention the loads of paperwork that come with this difficult lesson.

Determining whether an employee is exempt
The best approach is to classify your employees correctly the first time around. One of the safest places to start is by assuming that all of your employees are non-exempt and therefore entitled to overtime. Nationally, most employees are non-exempt, so while it may be tempting to start hoping for exempt status, you’re better off assuming otherwise and then moving forward with reviewing the applicability of exemption standards, just to be safe.

FLSA rules for exemptions
The FLSA outlines how to determine whether an employee is exempt, with a description of their standards available here. As a starting point, you should know that any salaried worker who earns less than $23,600 per year will be considered non-exempt. For employees who earn more than that, their exemption status will be determined by the type of work that they perform. Also, note that many states have rules which eclipse those of the FLSA (to the benefit of the worker); therefore, acquainting yourself with all of these rules is crucial.

You should reach out to employment counsel or HR experts for assistance with navigating these difficult waters.

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