Exempt or Nonexempt? Classifying employees

Should That Employee Be Exempt or Non-Exempt?

Unsure whether you have an exempt or nonexempt employee? Before you classify a role incorrectly, check the requirements for what it takes to legally be considered exempt. If you classify an employee incorrectly, you could be putting your business at risk.

Hear answers to the top exempt vs. non-exempt employee questions, including, "If my exempt employee asks for time off but has no paid time off left, does that mean I need to pay them?" Exempt Employee Definition 

The term “exempt employee” relates to any worker who is exempt from receiving overtime, regardless of the number of hours worked. But in order to qualify for this status, the role has to meet specific criteria.

Minimum Salary

In order for an employee to be exempt, they must have a minimum salary of at least $844/week ($43,888/year) and meet at least one of the allowable exemptions. Outside sales reps are exempt from the minimum salary amount.

*Please note: as of January 1, 2025, the minimum salary amount increases to $1,128/week ($58,656/year).

Allowable Exemptions

In addition to a minimum salary amount, an exempt employee must also meet at least one of the following exemptions:

1. 1. Executive exemption

      Performs management duties and has the ability to hire, fire and promote staff.

   2. Administrative exemption

      Primary duty includes the “exercise of discretion and independent judgment with respect to matters of significance.” Here’s a more detailed explanation of what that entails.
      
      

   3. Professional exemption

      Performs a job requiring advanced knowledge in a field of science, learning (typically a college degree is required), or a creative field.
      
      

   4. Computer employee exemption

      Serves in a role that is highly skilled at computers. This fact sheet from the Department of Labor has more information.

   5. Highly compensated employee exemption

      Receives annual compensation of at least $132,964 annually ($151,164/year as of January 1, 2025) and performs office or non-manual work.
      
      

   6. Outside sales exemption

      Primary job responsibility is to make sales away from the employer’s place of business.

White collar only

The FSLA indicates that exemptions are only available to jobs that are classifiable as “white collar.” “Blue collar” workers who perform manual labor and/or certain repetitive operations cannot be exempt employees.

No first-responders 

According to the FLSA, there are a few professions that cannot qualify for exempt status including police, firefighters, paramedics, and other first responders.

Nonexempt Employee Definition

If a worker cannot meet the exemption criteria listed above, they are considered “nonexempt.” For most states, this means they must track hours worked and receive overtime pay for any hours worked in excess of 40 per week.

Some states have daily overtime laws. See the DOL breakdown by state (select the state and view "Premium Pay After Designated Hours").

Salaried employees and nonexempt status

Not all salaried employees are considered “exempt.”  A nonexempt employee can be paid on a regular salary basis each week, but that worker must track hours worked and be paid overtime where applicable.

Blue collar employees who receive a salary

The FLSA states that blue collar employees are always classified as nonexempt, even if a blue-collar worker receives a salary rather than an hourly rate of pay. Hours worked by blue-collar employees must be tracked so that wages paid reflect any overtime work.

Example: Jim is an electrician (nonexempt) who is paid a salary of $800/week. In late December, Jim is asked to put in extra hours so a job can be completed before the end of the year. Jim works 10 hours overtime that week.

Here’s how he would be compensated:

White collar workers can also be nonexempt

Workers considered “white-collar” must meet the exemption criteria of the FLSA in order to be considered an exempt employee. If not, the white-collar worker is considered nonexempt.

That means they must track hours and be compensated through overtime wages whenever regular work hours are exceeded.

Advice: Be cautious or get advice

If you’re unsure whether a role can be classified as exempt, you have two options:

1. Err on the side of caution and classify as nonexempt. While it can be more expensive, if you’re unsure whether an employee qualifies as “exempt” vs. “nonexempt,” classifying the employee as nonexempt will prevent any later legal problems. Remember that the employee needs to track their time and that you will be required to pay for overtime wages, where applicable.
   
   
2. Talk to an expert. HR professionals can advise you on whether a role meets the criteria associated with “exempt” status. Reach out to your certified HR expert for guidance. 
   
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