Exempt vs. Non-Exempt Employees: a Look at the Flsa

President Franklin D. Roosevelt enacted the FLSA on June 25, 1938. It was signed in as a federal labor law to provide criteria for governing general labor practices such as overtime, minimum wages, child labor protections and equal pay. The Fair Labor Standards Act is a long and extensive document in and of itself. It defines many exceptions and exemptions. For purposes of this paper the portion of the FLSA that will be concentrated on is the difference between exempt and non-exempt employees. Let's begin by defining exempt and non-exempt. Non-exempt employees are those that are paid on an hourly basis and receive overtime compensation at one and one-half times their base pay for all hours worked in excess of some standard threshold. In most cases this "threshold" is 40 hours, but that is not always the case. Dividing the annual salary by 2080 to give a base hourly amount can derive the base pay for most, not all but most, employees. Exempt employees are those that do not receive compensation of any kind for hours worked in excess of whatever the threshold maybe. By definition of law exempt employees must be paid on a salary basis and job duties performed by said employee must be high-level such as executive, administrative or professional. To decide whether an employee meets the criteria for being exempt, there are two tests – the duties test and the salary basis test. For the salary basis test, employees being paid on a salary basis have a distinct definition. The FLSA defines salary as payment of an equal amount every pay period no matter how many or how few hours are worked, as well as compensation not being subject to reduction on the basis of quantity or quality. By this definition an employee can expect to receive a guaranteed minimum amount of pay each pay period. If an employee works a minimum of one hour during a work period the employee should receive the full amount of the guaranteed minimum payment. The salary basis test is subject to many