While your employees might not like being told to work more than 40 hours in a given week, that doesn’t mean it’s illegal to demand it of them. In fact, no federal laws prevent you from having most of your salaried employees work more than 40 hours per week. These employees are called exempt employees. As an employer, you need to understand exactly what an exempt employee is, how exempt employees differ from nonexempt staff and what you can legally ask of these workers.
The Fair Labor Standards Act (FLSA) does not apply to exempt employees. In other words, “exempt” actually means “FLSA-exempt.” As such, exempt employees do not receive overtime pay and sometimes aren’t required to be paid minimum wage. Determining who qualifies as an exempt employee can seem a bit complicated, but it’s easier than you might think.
All exempt employees are salaried, but not all salaried employees are exempt. All hourly employees, on the other hand, are nonexempt. This means they are entitled to overtime pay and pay rates of at least the FLSA or state minimum wage — whichever is higher. The FLSA does not enforce these regulations for most salaried employees.
Exempt employees are not covered by FLSA regulations regarding overtime pay and minimum wage, and most (but not all) exempt employees are paid an annual salary.
An exempt employee’s weekly work hours are not regulated, because the FLSA does not govern their work. As an employer, you can have your exempt employees on the job for 40 hours, 20 hours or 70 hours per week, for example, without altering how much you must pay them. Of course, you’ll want to consider the distinctions between full-time and part-time employees, but exempt employees’ work hours have no bearing on their exemption status.
Exempt employees have no maximum or minimum number of work hours allowed per week.
To be classified as exempt, an employee must meet three criteria set by the Department of Labor (DOL):
Despite these three concrete rules, determining exemption status can be tricky. For example, it’s extremely common for employers to mistakenly conflate salaried employees with exempt employees. As you’ll see from these rules, the two are not mutually inclusive, and the DOL does not have exempt-status tests regarding hours worked per week.
Employees who meet the DOL’s salary level, salary base and duties criteria can be classified as exempt.
Before you decide whether to hire exempt or nonexempt employees, it’s important to understand the advantages and disadvantages of having exempt employees on staff.
The advantages of hiring exempt employees include no overtime pay and more knowledge and responsibility. Downsides include higher pay rates and no ability to deduct pay for hours not worked.
Keep these considerations in mind for exempt employees:
If you run a seasonal company, FLSA and exemption rules may work differently for you. Your company may be entirely exempt from adherence to the FLSA if you meet either of these criteria:
If your seasonal company meets either or both of these criteria, the FLSA does not apply to any of your employees.
While exempt employees often receive paid time off, they can also be subject to any policies you enact for unpaid time off. However, unpaid-time-off rules do not allow you to dock exempt employee pay for hours not worked in a workweek; you can only withhold pay for full weeks without work.
Just as the FLSA allows employers to give employees unpaid time off, you may not have to pay exempt employees whom you suspend. If an exempt employee commits a top-level company policy violation that could merit eventual firing, you can suspend them without pay.
When you misclassify a nonexempt employee as exempt, you might fail to pay the employee in instances when they’re entitled to extra wages. If the employee realizes this, they could sue you for up to three years of missed wages. Separately, you could also face fines of up to $1,000 per misclassified employee. Misclassifying employees is costly, and that’s before you add the legal fees you could also incur.
You can legally give exempt employees unpaid time off or unpaid suspension, and some seasonal companies are entirely exempt from FLSA adherence.
If you remain unsure whether you’re classifying employees properly, it’s best to speak with an attorney who’s experienced in employment law. With this invaluable professional expertise on your side, you can make sure you’re complying with regulations and avoiding costly repercussions. And if you lack the time or money to consult with a lawyer, this guide can help you do much of the heavy lifting.