Exempt Vs. Non-exempt Employees: A Look At The FLS Essay

This essay has a total of 926 words and 4 pages.

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 exceptions and
interpretations. An employee, who receives benefits for sick leave that is accrued in some
type of benefit plan, for example, is still considered exempt. Employees who do not work
at all during a pay period can also have reduced pay, this does not mean they are not on
salary but that they performed no work duties. One exact exception is that computer
professionals may be paid hourly and still be considered exempt, as long as
his/her hourly wage is at least 6.5 times the minimum wage.

The duties test provides standards by which employees can be considered exempt according
to the duties they perform. There are three general characteristics that may qualify a
person as exempt. The executive exemption applies to those employees who have management
duty, direct the work of two or more people, have authority to hire and fire or make
decisions that affect the employment status of others, make decisions affecting the
business and require a high degree of independent judgement, who are paid a salary that
meets FLSA requirements, and do not devote more than 20% of their time to task that are
considered to be non-management functions. The administrative exemption applies to those
employees who perform non-manual work that is directly related to the policies or general
operations of the business of their employer or the employer's customers, who exercise
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