Q: Right now, I’m recruiting for an inside sales position. How do I know if this position or any other positions that I recruit for should be exempt or non-exempt?
A: I’m sorry to say that this is a surprisingly complex question, but we’ll get you through it.
First, just to make sure we’re on the same page: let’s review some key definitions.
Exempt Positions: Are typically salaried and must meet the minimum weekly wage of $455. These employees do not earn overtime.
Non-exempt Positions: Non-exempt employees are generally paid by the hour and must be paid at least the minimum wage for all hours worked. Employees may receive overtime pay if they work over 40 hours.
Whether employees are classified as exempt or non-exempt depends on:
- The employee’s wages
- How much the employee is paid
- What kind of work they do
To this end, the Fair Labor Standards Act (FLSA) has three tests to determine the proper classification for employees.
1. Salary Level Test (how much an employee earns)
Currently, exempt employees must be paid $23,660/year or $455/week in order to be considered exempt. If employees make less than these specified amounts, they’re probably non-exempt.
2. Salary Basis Test (how an employee is paid based on certain criteria)
Is the employee guaranteed a minimum amount of pay during a workweek? If yes, the employee may be non-exempt. Will the employee be paid a fixed salary that doesn’t change despite fluctuations in the quantity or quality of the work? If yes, the employee may be exempt.
3. Duties Test (type of work being done)
Keep in mind that the employee’s job title or position description doesn’t determine his/her status. The duties test helps employers evaluate an employee’s job tasks to determine if an employee should be exempt. If the employee doesn’t pass the duties test, even if they passed the salary level and salary basis test, they can’t be classified as an exempt employee.
FLSA has a list of job duty categories that count as exempt. The primary categories are Executive, Professional, and Administrative. Review the fact sheets to determine if an employee is exempt based on the associated job duties tests defined for each category.
Executive Job Duties
Reference: Fact Sheet #17B: Exemption for Executive Employees Under the FLSA
Professional Job Duties
Reference: Fact Sheet #17D: Exemption for Professional Employees Under the FLSA
Administrative Job Duties
Reference: Fact Sheet #17C: Exemption for Administrative Employees Under the FLSA
KPA’s Vera HR® clients and Risk Management Center users also have access to a classification wizard to help make exempt vs. non-exempt determination easier. Plus, clients can get more assistance from KPA’s HR consultants or our partnering law firm.
Last, keep in mind that your state may have additional exemption guidance. For example, California and New York have higher salary thresholds than the federal one.
Bottom Line: Be careful in determining your employees’ exemption status and go through all three FLSA tests.
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