What to Know About Being Exempt from Overtime Rules
If you earn more than the new minimum wage for workers from your current employer, you are likely an exempt employee. However, that's not always the case. You may still qualify for overtime pay if youdo not meet the exemption conditions authorized by the Federal Labor Standards Act (FLSA).
On the flip side, a non-exempt employee mostly receives hourly wages and is paid less than the minimum wage. In that case, they qualify for overtime pay for every hour worked after the regular 40 work hours per week. Many employers attempt to trick their workers into accepting the exempt employee status, even though they are not. In some cases, they may assign executive, professional, or administrative positions because they want to save more money.
Effective January 1, 2020, the DOL set new rules that determine whether a worker receives overtime payment or not. Knowing the difference between an exempt and a non-exempt employee status may not be easy. However, don't worry. We will help you quickly discover if you qualify for overtime pay in this guide.
How to Know if You Are Exempt
Receiving a fixed salary per year does not necessarily qualify you for the exempt employee status, even though it is a requirement. Also, holdinga white-collar position does not mean you can’t receive payment for working more than the expected 40 hours per week.
The new DOL rule has a few exceptions that may mean you can qualify for overtime pay. Generally, you are an exempt employee if you hold an executive, a professional, or an administrative position.
Below are exempt employee roles to help you clear every doubt you may have:
1. Professional Employees
Employees who discharge professional duties are exempt from overtime laws. Generally, a professional employee should be certified and licensed in any of the following fields:
- Law (which may include law school graduates in some cases but excludes paralegals)
- Medicine (excluding nurses)
- Dentistry (excluding dental hygienists)
- Public Accounting.
To classify a professional worker as exempt, some other conditions must be met, including the following:
- They mustspend more than half of their work time discharging duties relating to their profession.
- They must meet the minimum wage requirement for exempt employees based on the dictates of the FLSA.
2. Administrative Employees
There are two main criteria to consider a worker an administrative employee, and they are:
- Minimum salary rate
- Time spent on intellectual work
The roles of an administrative employee include the following:
- Making critical business decisions that affect a company’s growth and success with little or no supervision.
- Working regularly outside the company’s production section.
- Assisting the owner of the company, another manager, or administrator regularly and directly.
- Performing work that requires intensive training, experience, or knowledge withminima or little supervision.
3. Executive (or Managerial) Employees
As an executive worker or manager in a company, you must meet all the conditions below to qualify as an exempt employee:
- You meet the DOL-approved minimum wage.
- You spend at least half of your time managing a unique department in the company or doing other managerial work, such as supervising, evaluating, and delegating tasks to other employees. Your work may also include planning and strategizing to complete tasks, keep records, handle complaints, and so on.
- You are allowed to make independent, critical decisions that affect the company’s growth and successwith minimum or no direct supervision.
- You supervise at least two or more full-time employees’ worksas part of your regular job—not something you engage to fill up space for another supervisor.
- You give recommendations and suggestions about people to hire into the company and employees to fire from the company.As an executive, people in your workplace respect your opinions and pay utmost attention to them.
What Are the Exceptions to Being an Exempt or a Non-Exempt Employee?
Though exempt employees are streamlined to fixed salary earners, administrative workers, executive workers, and professional workers, there are exceptions based on the new legislation by the FLSA and the DOL that was effective January 1, 2020.
In September 2019, the DOL established a rule that pegged the minimum wage for white-collar exemptions at $684per week ($35,568 a year) – more than a 50 percent increase from the previous amount.
More specifically, the exceptions and other details contained in the DOL rule effective January 1, this year, are as follows:
- Workers who do not earn a minimum of $35,568 a year (or $684 a week) must receive payment for overtime work hours, even if they are classified as a manager, an administrative worker, or a professional.
- Nondiscretionary bonuses and incentives (which may include commissions in some cases) paid annually (or other regular periods) may be used to cover up about 10 percent of the standard salary.
- For HCEs (Highly compensated employees) who earn less than $107,432 annually, including a weekly $684 compensation, they may not be treated as exempt workers and must be paid for overtime work hours.
Is it Necessary to Track Time for Exempt Employees?
Employers don’t need to track time for exempt employees since they have fixed salaries. However, they may need to keep records, generate detailed reports, and monitor them ethically because of the pivotal role they play in a company.
Traqq’s employee monitoring software can help employers keep tabs on their exempt workers to ensure they are doing their best at work. Administrative, executive, and professional workers in your company can use Traqq to effectively monitor their subjects.
What's more, you can use the time tracking software to keep an accurate time record for your non-exempt workers to avoid conflicts when it's payday. You'll simply use the "auto-generate invoice" feature on the app for each non-exempt employee.
On a Final Note
It is vital to know what it means to be an exempt or a non-exempt employee so your current employer won't cheat you. However, your best option is still to seek professional legal advice to know if you’re qualified for overtime pay.