Employment Classifications: Exempt or Non-Exempt

By Allison Villarreal, PHR, SHRM-CP

Employment is a relationship between two parties in which the employee works in return for a paycheck from the employer.  The payment for the services, the employee has completed, may be on an hourly basis or a salary basis.  The “hourly basis” or the “salary basis” is known as the pay method.  On the other hand, is the exempt or non-exempt classification per the Fair Labor Standards Act (FLSA).

The classification of exempt or non-exempt determines if the employee in a specific job position is exempt to the minimum wage and/or overtime.  While there are exemptions and exceptions from the minimum wage and/or overtime standards of the FLSA, an employee and the position to which they are assigned must meet three tests to qualify for the exemption: (1) Salary Level, (2) Salary Basis, and (3) Job Duties.

A description of each test is:

(1)  Salary Level Test:  An exempt employee must earn a minimum amount.  The amount of salary paid must meet a minimum specified amount of $23,660 (annual), unless and until that figure is revised upward.  Standard salary level – pursuant to 29 CFR 541.600, is currently $455 per week.

(2)  Salary Basis Test:  The minimum amount must be paid on a salary basis.  The employee must be paid a predetermined and fixed salary that is not subject to reduction because of variations in the quality or quantity of work performed.

(3)  Duties Test:  In addition, exempt employees must perform certain executive, administrative, professional (learned professional or creative professional), outside sales, or computer professional job duties set forth in the regulation.

If the employee and the position description do not “pass” all three tests, then it will be classified as non-exempt, and therefore entitled to the minimum wage and overtime pay per the FLSA.

While regular exempt and non-exempt employees may be the most common classifications, other classifications include independent contractors, interns, trainees, temporary employees, and volunteers.

Please contact Allison Villarreal, avillarreal@hallalbright.com, for questions on meeting the requirements of those classifications defined by the FLSA, as well as any Alabama state wage and hour laws.