The Distinction between Exempt and Non-Exempt Employees

The exempt/non-exempt employee distinction is one of the most frequent reasons for lawsuits against companies in the United States. It can also be one of their most costly mistakes. Earlier in the month, a federal panel joined a group of lawsuits filed in California, Florida, Texas, Washington, and Kansas against Bank of America.

Tellers and other hourly employees claim that Bank of America violated the Fair Labor Standards Act or state wage and hour laws. When employees worked more than 40 hours in a week, they claim the bank gave them compensatory time off or told them not to record more than 40 hours. Bank of America went so far as to modify their hours, the plaintiffs allege, if they went overtime. Altogether, the claims could be more than $100 million, and up to 180,000 employees could be involved in the suit.

As this lawsuit demonstrates, when a company misclassifies or fails to properly pay overtime to one employee, it is likely that there are many more. From an employer’s standpoint, your business needs to make sure it complies with wage and overtime laws and is properly classifying its employees. From the employee’s perspective, you should be receiving the money that you rightfully earned. If you are concerned with wage and overtime compliance, a Los Angeles discrimination attorney can advise you of recent changes in California and federal employment law.

Determining Exempt/Non-Exempt

The general rule is that, if an employee works more than 8 hours in one day, he or she should receive pay at time and a half. Likewise, if an employee workers more than 40 hours in a week, he or she should receive pay at time and a half. If an employee works more than 12 hours in a day, the pay should be double time. Employees entitled to receive this overtime pay are non-exempt employees.

Some jobs are exempt from these overtime pay requirements, however. These employees are exempt employees. The exempt/non-exemption distinction hinges on the job requirements and not the employee. The following are occupations that are typically exempt from overtime pay requirements:

• Executives — job duties include directing two or more subordinate employees, managing, handling complaints and discipline, and devoting less than 50% of work time to activities other than manager duties.
• Learned professionals — this area includes physicians (but not nurses), attorneys, accountants, professors, and engineers.
• Creative professionals — people involved in artistic or creative work.
• Administrators — job duties involve spending more than 50% of time related to managing general business operations of an employer.
• Outsides sales persons — people who work away from the employer’s place of business and sell things.
• Computer-related workers — job titles include computer programmer, systems analyst, applications programmer, and systems engineer.
• Highly compensated workers — guaranteed annual compensation of at least $100,000.
• Physicians and surgeons

Employers should be aware that courts and administrative bodies construe the exempt definitions quite narrowly. If you have to stretch to categorize an employee as exempt, you may be making a mistake that could end up costing your business a lot of money down the line. In some exempt categories, particularly the executive one, a business cannot easily make the determination. Whether you are a business unsure of how to classify its employees or an employee who suspects he or she is not receiving fair wages, contact a Los Angeles employment attorney at the Law Offices of Kesluk & Silverstein to learn more about exempt and non-exempt employees.