Myth Busting: Exempt Jobs

Perception

There is a pervasive myth that having a salaried job, or being an exempt employee, is somehow better or of higher status than being in a job that is paid hourly, or non-exempt. You have probably heard people joke about "graduating" to an exempt position in your organization or in past roles or feeling free from the burden of tracking their hours. However, here’s the myth buster—in some cases, non-exempt employees eligible for overtime can bring home more pay in a year than an exempt employee, depending on other job factors and specific circumstances.

Question: Who decides whether a position is exempt or non-exempt?

Answer: The FLSA (Fair Labor Standards Act) and state laws.

The Rules

FLSA is shorthand for the Fair Labor Standards Act of 1938, where Section 13(a)(1) provides specific guidance on which jobs are exempt from minimum wage and overtime requirements outlined in the Act.

An exempt status means an employee is exempt from overtime laws, and does not need to meet the break and lunch requirements that an hourly (non-exempt) employee must follow. These salaried positions are commonly called the "white-collar" or executive, administrative, or professional exemption. Three tests must be met to determine whether a role is exempt (from overtime and minimum wage) or non-exempt (meaning overtime is owed to the worker).

To quote Section 13(a)(1) of the FLSA directly, "…(1) the employee must be paid a predetermined and fixed salary that is not subject to reduction because of variations in the quality or quantity of work performed (the salary basis test); (2) the amount of salary paid must meet a minimum specified amount (the salary level test); and (3) the employee's job duties must primarily involve executive, administrative, or professional duties as defined by the regulations (the duties test). The employer bears the burden of establishing the applicability of the exemption."

A job's FLSA status has nothing to do with its overall importance to society, the organization, its clients, or the value of the person who holds the job. It is a legal determination created and enforced to ensure that an employee receives appropriate, fair, and legally enforced compensation due to the nature of their job duties.

A job position must satisfy the professional, executive, or administrative three-part assessment (salary basis, salary level, and duties tests) to be legally classified as “exempt”.

Job Titles

A role can be considered non-exempt, but paid in the form of a monthly or weekly salary. Positions that you may not realize that are typically classified and paid as non-exempt roles include:

• Police Officers
• Registered Nurses (RN)
• Assistant Managers

Are these roles less important or of a lower social status simply because they are classified as non-exempt? Of course not. We use social judgments to navigate our culture and society, but this doesn't mean our judgments are based on facts, hence the perception that being an exempt employee is of a higher status. Your work does not define you, but it does define your FLSA status!

As a sister association to CEA, Cascade Employers Association is available to help If you need assistance determining whether a position is exempt or non-exempt. They have a terrific compensation team and handle everything from market pricing of individual jobs to overall compensation strategies. Please reach out for an FLSA review or compensation discussion to ensure you have correctly categorized your organization’s jobs!