What Does It Mean To Be An "Exempt" or "Nonexempt" Employee?
These terms have to do with your status under the Fair Labor Standards Act (FLSA). Generally, employees are classified as "exempt" or "nonexempt" based on the kind of work they do. If you're an exempt employee, you'll probably be paid a set salary. Usually this salary will be pretty high, much higher than what you'd be earning at minimum wage, and you won't be covered by the FLSA. Nonexempt employees are protected by the FLSA. If you're nonexempt, you have to be paid at least the minimum wage for all the hours you work, and extra overtime pay if you work more than 40 hours in a single workweek.
The Department of Labor requires exempt employees to be paid a salary of not less than $455/week or $23,660/year. (For more information visit the US Department of Labor website.)
The most common exempt employees are:
- "white collar employees" (executives, administrators, professionals, and outside salespersons);
- certain retail and service industry salespersons who work on commission; and
- certain government employees (elected officials and their appointees, state and local legislative employees).
Many other kinds of employees are also exempt from the FLSA. It's your employer's task to determine whether or not you're exempt, based on your salary and job duties. The more responsibility and independent authority you've got, the more likely you are to be exempt. Your status depends on your actual duties, not on your job title.
If you're an exempt employee and your pay is "docked" for missed time at work--that is, if wages are subtracted from your paycheck--you might become nonexempt. As an exempt employee, you should be paid on a salary basis. This means you have to be paid your full salary if you do any work at all in a specific workweek. There are a couple exceptions to this rule, though. Suppose you're already used up all your vacation and sick time, and then one morning you fall down and twist your ankle. You can't drive, so you miss a few more days at work. Since you haven't got any leave left, your wages can be reduced for the extra days you missed. Also, if you take time off under the Family and Medical Leave Act, your pay can legally be docked.
Special rules apply to state and local government employees. Since they are "public servants," they're often held to stricter schedules than employees of private companies. In some areas the law requires that their wages be docked for any absences from work, even absences that last less than a full day. Sometimes a state or local government will close some of its offices or reduce its staff temporarily to save money. When this happens, the government can dock the paychecks of employees who aren't working These employees are still exempt, except during the period of time they've been told not to show up at their jobs.
If you're an exempt employee, your employer shouldn't dock your pay for less than a day's absence from work. If your employer does this, you're not being treated as an exempt employee. You might become nonexempt as a result, when means you'd have to be paid for any overtime that you work.
From time to time, you might have to leave work temporarily because of jury duty, service as a witness in a court of law, or military obligations. Your wages can't be reduced as a result of any such service that lasts less than a week, if you do some work during the week.
The minimum wage law: the current federal minimum wage is $5.85 per hour. If you're nonexempt, you have to be paid at least this much per hour, for every hour you work.
Your take-home pay may end up being below minimum wage. This is possible because of the taxes that are subtracted from your paycheck each pay period. "Noncash wages," such as room and board, can also cause your pay to fall below the minimum wage rate. Your employer is required by law to withhold income, social security, and Medicare taxes from your paycheck. Even though these taxes are subtracted from your wages, they're still considered part of your income. If you add all taxes and noncash wages back into your take-home pay, your total pay should equal at least the minimum wage rate.
If you show up late for work, your employer can subtract the amount of work time you missed from your wages. These deductions from your paycheck can't legally cause your pay to fall below the minimum wage for each hour you worked. They also can't result in your being paid less overtime than you've earned.