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Exempt or Non-Exempt? A Loaded (and potentially costly!) Question

Question:

With all the hype over the DOL changes to FLSA, I’m trying to evaluate our staff.  What is the difference between exempt and non-exempt? Is it the same as hourly and salary?

Answer:

You are right, the Department of Labor has released the changes to the Fair Labor Standards Act (FLSA) that is having a huge impact on the exemption status of employees.  The biggest change is that an employee cannot be “exempt”; if their salary is less than $47,476 (a few exceptions – i.e. outside sales).

FLSA provides details on an exemption analysis you can do to determine if an employee is exempt from compliance with the law.  Details about each exemption are provided on the FLSA government website.  The exemptions are based on the duties the individual performs.  The second test that has to be done is a salary test.  In the past, a salary of less than $23,660 had to be non-exempt regardless of whether the job role met any of the exemptions.  Now this threshold has been moved to $47,476.

An employee can be paid hourly or salary and be classified as non-exempt and any hours the employee works over 40 per week must be paid as overtime.  An exempt employee can only be paid a salary and is not entitled to overtime based on the FLSA as long as they meet the job duties and salary test mentioned above. This is a big change for many organization that have had employees (i.e. managers) making less than $47,476 but paid as salaried exempt.  You’ll want to review all your exempt employees to see who may be impacted by this change.  There are many ways to “fix” but the basics are moving the employee to non-exempt and begin paying them overtime for hours over 40 OR keep them as exempt and raise their salary above $47,476.

It’s never ending. Just when you thought you had a handle on recent regulatory changes something new crops up. There isn’t enough time in the day to keep on top of everything! That’s where strategic HR inc. can help. We stay on top of the changes so you don’t have to. Ask us for assistance with any of your benefits, compensation or other regulatory needs.

Please visit our Benefits & Compensation page for more information on any of these services.