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The federal Fair Labor Standards Act (FLSA) requires employers to classify jobs as exempt or non-exempt. Non-exempt employees are covered by FLSA regulations, while exempt employees are not. Exempt positions are excluded from minimum wage, overtime, and other rights and regulations under the FLSA.
Non-exempt employees are entitled to at least the minimum wage for hours worked, and are paid overtime pay (one and one-half times their hourly rate) for each hour worked beyond the standard 40-hour workweek. Most employees covered under the FLSA are not considered exempt. In most cases, the type of work, the amount of pay, and the method of payment (hourly or salary basis) govern how an employee is classified.
Salaried non-exempt positions are also subject to a minimum amount set by FLSA regulations. While most people think of minimum wage in terms of hourly employees, the FLSA sets a minimum weekly threshold for non-exempt pay. Some states may have a higher starting salary per week to qualify, in which case the higher state salary takes priority, but a non-exempt salaried employee cannot be paid less than the federal minimum.
While both salaried non-exempt employees and hourly employees are covered by FLSA rules and regulations and must be paid at least the federal minimum wage, they differ in how pay is determined. An hourly employee gets paid for the actual hours he or she works during the week. Hourly jobs generally reflect how much the employee will be paid for each hour worked.
In contrast, salaried employees are paid an annual amount, called a salary, which is divided between pay periods. Salaried employees are paid an amount based on the employer's expectation of how many hours the employee will work. It is not uncommon for salaried employees to work more or less than a ""normal"" 40-hour work week.
Exempt positions are excluded from minimum wage, overtime regulation, and other protections that non-exempt employees receive under the FLSA. For an employee to be exempt, they must receive a salary rather than an hourly wage for their position. Salaried exempt employees are expected to work the number of hours necessary to perform their duties, whether that is 35 hours or 55 hours per week. Their compensation does not change based on the actual hours they work.
Exempt employees also typically earn a fixed salary that is higher than those who work 40 hours per week, minimum wage. Generally, white-collar employees (executive, professional, and administrative staff) are exempt positions.
All positions are non-exempt by default, and the employer can change an employee's status from exempt to non-exempt, even if a position qualifies for exempt status. As with all non-exempt positions, the employer must track hours worked and pay overtime when appropriate.
In addition, the change must be made with the intention that it will be long-term or permanent. Week-to-week changes or frequent changes may indicate that the employer is trying to avoid paying overtime.
The answer to this question depends largely on the employee. Some employees want the security of knowing they are paid for every hour they work, and therefore prefer non-exempt positions. Others prefer the greater freedom that comes with salaried positions and choose exempt positions over non-exempt positions.
For example, non-exempt employees are typically held to a more stringent standard when it comes to things like casual time or breaks. Exempt employees are also free to spend more time interacting with co-workers without fear of incurring the wrath of a supervisor. Non-exempt employees are often only allowed certain breaks during the workday and their time is more closely monitored.
Generally, exempt employees are paid more than non-exempt employees. Because they are expected to complete work rather than keep track of hours, staying late or coming in early may be necessary to perform work. Non-exempt employees generally work only their set hours.
While in general, non-exempt employees have more protection under federal law than exempt employees, most employers treat their exempt and non-exempt employees equally. There is also universal workplace legislation that entitles all employees, whether exempt or non-exempt, to equal employment opportunities, a safe and healthy work environment, and the rights provided under the Family and Medical Leave Act and federal child labor laws.
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