Many of us working a regular job are familiar with overtime pay. However, not everyone working on the clock is entitled to this extra compensation.
The U.S. Fair Labor Standards Act (“FLSA”), which establishes overtime pay mandates, classifies employees into two categories: nonexempt and exempt.
Exempt and nonexempt workers
Nonexempt workers are paid hourly and are entitled to overtime wages. Exempt employees receive a set salary, which must be a minimum of $684 per week, and are ineligible for overtime pay.
In addition to being paid a salary, an employee will be deemed exempt only if the job duties also qualify for exemption. Indeed, it is a common misperception that paying a salary in and of itself satisfies the exemption. There are several types of exemptions, but some of the most common ones include the executive, administrative, professional and outside sales exemptions.
Exempt employees
An exempt worker must receive a set salary, regardless of the number of hours worked in a given day or week. If any work is performed at all in a day, the employee must be paid salary for that day.
Nonexempt workers
As the name suggests, hourly workers receive an hourly wage for each hour they work. They are considered nonexempt employees and thus are entitled to wages one and a half of their hourly wage for any time worked over 40 hours in a workweek. Keep in mind that an employee will be deemed nonexempt even if their job duties would otherwise qualify for exemption if they are being paid hourly.
(A workweek is a regular cycle made up of 168 hours or seven straight 24-hour periods. A workweek is not necessarily the same as a calendar week and may start on any day or time.)
Upside and downsides
Depending on how you look at the situation, some would say that one downside to being a salaried exempt worker is that one never receives overtime pay for hours worked over 40 in a given workweek.
However, others would say that, although salaried employees do not get overtime pay, the hours they work vary from week to week and they are presumably being paid a sufficient salary to make up for any hours worked over 40.
It’s important to note that job duties and other prerequisites determine how you as an employee are classified – regardless of what the employer and employee may agree. Employers unsure as to whether employees are properly classified, or employees who are unsure if they may be entitled to overtime pay, should seek the advice of an employment law attorney.