Exempt v Nonexempt Employees

Exempt v Nonexempt Employees

The United States Department of Labor regulation regarding salary levels for exempt and nonexempt employees will go into effect in January 2020. The minimum salary for exemption status will be $35,568 (or $684 per week). Before that goes into effect, I strongly suggest that employers review the classifications of their employees. The classification of employees is one of the things that can get employers in a great deal of trouble if employees are not properly classified.

The default position of the law is employees are considered nonexempt, which means that they are eligible for minimum wage and overtime protections. It may feel odd to have something labeled in the negative, but think of it as though your employees are not exempt from minimum wage and overtime laws.

If you have somebody who is nonexempt, you are required to pay that employee time and a half if they work more than 40 hours per week. However, there are some ways around that, such as the use of a fluctuating workweek. There are ways in which you can have somebody paid a salary, which generally fall into the “Executive Administrative and Professional Exemptions (EAP).”

If you have an employee who makes at least $684 per week as their base salary, then they might be eligible for exempt status (note the word might). There are two tests we use to determine exemption status: the salary test and the job duties test.

Let’s start with the salary level test. If an employee is making $684 per week, that salary cannot change from week to week based upon the quantity or quality of work. If you have somebody who is paid a salary and they don’t come into work one day, or perhaps they come in early or leave late, you cannot change or dock their salary simply because they worked fewer than 40 hours in a week. If you dock somebody’s pay because of their time spent at the office, then they are not truly a salary employee and would therefore be classified as non-exempt.

Next, let’s take a look at the job duties test. The Department of Labor has been pretty reluctant to change the standard for job duties. To assess this part, you’ll want to take a look at the employee’s primary job duty. Is that primary duty what they spend the majority of their time doing? Would they be classified as an executive, administrative, professional, or outside salesperson as their primary job duty? If the person spends 51% of their time in that duty, we wouldn’t consider that the majority of their time in this case. We’d like to see that job duty performed in 70% or more of their time to be classified with an exempt status.

When you are assessing whether or not an employee will be classified as exempt, you have to assess if they have the minimum salary ($35,568 annual salary or $684 per week). Remember that number does not go up or down due to the quantity of hours worked nor the quality of work performed. Next, you have to assess the employee’s job duties to see if they fall into an exemption category.

Stay tuned to learn more about the “Executive Administrative and Professional Exemptions (EAP).”