Exempt v. Nonexempt: Understanding Overtime Pay Rules

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Most jobs are governed by the federal Fair Labor Standards Act, which requires that employees be paid overtime pay if they work more than 8 hours in a single day or more than 40 hours in a week. Some jobs, however, are considered “exempt” from FLSA overtime rules. Knowing the difference between exempt v. nonexempt is important for employees. Due to the rising number of class action lawsuits regarding unpaid overtime, employees should be aware of when they are being undercut in their pay, and are owed compensation.

FLSA overtime rules require employers to pay nonexempt employees overtime pay, which is one-and-one-half times the regular rate of the normal hourly rates.  Employers that violate overtime laws could face fines, jail time, and possible business shutdown.  It is important to note that overtime is not applicable to exempt employees, which are classified as such based on administrative or executive duties.

However, typical nonexempt employees are eligible for the increased rate. Violations of unpaid overtime include:

• The failure to pay employees overtime when they work overtime hours;
• Failure to include non-discretionary bonuses when calculating overtime pay;
• Misclassifying employees as exempt from overtime when they are not.

Any of these violations could mean that an employee is owed back pay of overtime compensation. One of the easiest ways to see if you’re owed overtime pay is to obtain a free evaluation of your case by an unpaid overtime class action lawsuit lawyer.

Exempt v. Nonexempt: Overview of Overtime Rules

The FLSA requires most employees in the United States be paid at least the federal minimum wage, at $7.25 per hour, and after the amount of hours worked passes 40, they are entitled to the increased overtime pay.  This includes non-discretionary bonuses for all hours worked over 40 hours in a workweek.

Many states also have their own laws governing minimum wage and overtime hours.  The only time an employee would be exempt from overtime pay would be if the employee was an executive, administrative, professional, or outside sales employee.  However, it is important to note that titles such as “executive” and “administrative” in a job title do not mean automatic overtime exemption.

For an employer to classify an employee as exempt, the employee must pass a two-pronged test consisting of a salary basis and occupation duties.  A salary test is passable when an employee is paid a fixed amount of money in a weekly, bi-weekly, or monthly rate.  There is no deduction from a fixed rate based on the quantity or quality of the work.  As for the duties test, it’s determined by what duties the employee actually performs on the job, as opposed to “job titles” or written “job descriptions.”

To be exempt as an executive employee, a person must:

• Customarily and regularly direct the work of two or more other full-time employees;
• Have management as their primary duty;
• Have the authority to hire and fire, or effectively to recommend such action or other changes in status;
• Customarily and regularly exercise discretionary powers.

To be exempt as an administrative employee, a Person must:

• Customarily and regularly exercise discretion and independent judgment;
• Regularly and directly assist an executive or administrative employees, or perform under only general supervision work that is specialized.

To be exempt as a professional employee, a person must:

• Be advanced in the custom knowledge and skill required to perform the task;
• Perform work which is predominantly intellectual and varied, and which cannot be standardized in relation to a given period of time.

The lists above are not complete, so it is important for any employee who suspects or knows that they are being undercut in pay to take action.  If solving the problem administratively does not work, legal action may be required.

Get a Free Unpaid Overtime Case Review

If you believe that you’re owed unpaid overtime, minimum wage or other compensation required under federal or state labor laws, take action now. Obtain a free review of your claims by submitting your information for a confidential review by an employment lawyer. You may do so and learn more at our Merchant ZIP Code Collection Class Action Lawsuit Investigation.