What’s the Difference between Exempt and Non-Exempt?

The Fair Labor Standards Act (FLSA) classifies employees as exempt or non-exempt based on a series of requirements including a salary level and job duties.  Employees who are classified as “exempt” are exempt from overtime regulations, meaning they can be required to work more than 40 hours in a week without receiving overtime pay.

Conversely, employees who are “non-exempt” must be paid overtime if they exceed 40 hours of work in the week.   An employer that classifies an employee as exempt when the FLSA and its corresponding regulations would require they be non-exempt is viewed as attempting to avoid paying overtime, which can lead to federal investigations, lawsuits and penalties.  Additionally, calling an employee a supervisor or manager is not enough to have them classified as exempt; they must also meet the duties test.  It is a violation of wage and hour law to misclassify a position.  Despite the law, many employees perceive that being exempt is a desirable benefit.

Exempt employees are expected to put in the hours required to accomplish the work.  This implies that they may be expected to frequently or regularly work more than 40-hours a week.  On the timesheet, exempt employees document the days in which they worked.  Some employers may only record blocks of eight-hours or four-hours.   In exchange, exempt employees have some flexibility in that if they attend a doctor’s appointment or run an errand at lunch, they would not record this time away from work because it does not amount to a four- or eight-hour block. 

Timesheets should accurately reflect a day’s work and leave accruals taken, so if an exempt employee is on a cruise ship on Friday, the timesheet should not indicate hours worked.  Many times, exempt employees refer to their time as “working out in the wash” meaning the time will balance eventually.  Other exempt employees refer to the personal standard of “the first 40 are in the office” meaning if they claim 40 hours on their timesheet, they worked 40 at a minimum. 

As an exempt employee, supervisors, managers and directors may receive or respond to urgent questions or calls, including those occurring on evenings or weekends.  Unlike non-exempt employees, they will not record this extra time as time worked.  Sometimes, exempt employees will say, “I am on-call 24 hours a day, seven days a week.” Yet, there is a difference between exempt employees receiving notification about an issue and having their off-work time restricted because they have to actually respond to calls. 

Generally, except in limited circumstances, even non-exempt employees are not considered to be working while on call until they are called on to actually work. The exempt employee should not consider on-call hours worked either. 

Employees may complain, “I wish I was exempt because then I could come in whenever I want and work from home whenever I want.”  An employee’s status as non-exempt or exempt should not affect their eligibility for telecommuting, but such arrangements need to be within the organization’s policy and outlined in writing. 

Many organizations have a telecommuting agreement, a memo agreeing to the nature of work to be performed during telecommuting, and a policy regarding such activities.  This is also the case for alternative schedules.  It is important that supervisors understand that an exempt employee continuously coming in late is a performance issue that should be addressed and that the FLSA does not allow the exempt employee to have 30-minutes of pay deducted for coming in late.  For this reason, having agreements, communicating clearly and discussing expectations is critical. 

This may be best understood with an example: Sonja has two exempt employees who report directly to her.  Claire is an outstanding performer whom Sonja has let work an alternative schedule so that she may drop off her kids at school each day.  Claire more than makes up the hours, staying late and often working from home on weekends. 

Sonja’s other exempt employee, Anne, is not performing consistent with expectations and has many overdue projects.  Anne comes in later and later each day and has never discussed the reason why with Sonja.  Anne leaves exactly at 5 p.m. each day and frequently takes extended lunches.  She is not putting in 40-hours in each week, her direct reports find her to be unavailable when they need assistance and office morale is declining.  When Sonja meets with Anne to discuss the performance issues, and wants to have Anne acknowledge that the office is open from 8 a.m. to 5 p.m., Anne responds, “This isn’t fair, Claire doesn’t come in at 8 a.m. and she hasn’t signed a memo acknowledging the hours of the office. Also, I’m exempt. I don’t have to clock in.” 

 Sonja cannot reduce Anne’s paid time by 30-minute or one-hour increments.  But she should document Claire’s alternative work schedule and address Anne’s performance deficiencies. She also needs to have a conversation regarding the expectations of completing her work as an exempt employee. If the department has a policy that requires staff to request vacation one week in advance, than all staff, including exempt staff, should abide by the policy.  This prevents the appearance of favoritism, bias or simple unfairness.  Applying policies, rules and procedures consistently across exemption classification is an issue of fairness and respect. 

All employees have a boss, whether that supervisor is an elected official, director, board, or the citizens themselves.    Additionally, employees in leadership roles are expected to set a tone and model a behavior for the office, to provide leadership and guidance.  The root issue in the scenario of the Friday before the major holiday is not truly an issue of exempt or non-exempt, but rather a question of leadership.  In this scenario, no management or leader was willing to do the work they were asking of others, staying to serve the customers while the office was required to be open.  The outcome was that the employees’ integrity was tested: were they willing to leave without asking or skip clocking out? 

 Both exempt and non-exempt employees desire to work in an environment free from micromanagement. 

Establishing expectations and policies to be followed by all employees builds a team environment full of collaboration, respect and trust, whether it is the Friday before a major holiday, or a Wednesday in August, which according to crossword puzzles is the only month without a holiday.