The Exempt & Non-Exempt Mindset
Transitioning non-Exempt to Exempt
When employees first begin their journey into the working world, they typically start out as a non-exempt, hourly employee. Non-exempt employees are paid an hourly wage that at least meets federal or state minimum wage requirements. They are “non-exempt” from overtime, which means they earn at least time and a half of their regular rate of pay if they work more than 40 hours in a work week. (Some states have additional overtime payment requirements.)
Employees who are salary exempt, instead, have a pre-determined annual salary, and they are “exempt” from overtime. Exempt employees are not eligible for overtime pay, meaning they are not eligible for additional pay regardless of how many hours they work during a work week.
The Department of Labor’s Fair Labor Standards Act regulates most all of wage classifications and regulations (unless a state law is more favorable to the employee); certain pay thresholds must be met, and these exempt positions must meet specific requirements in order to be exempt from things like minimum wage and overtime.
There are five types of exemptions:
Executive, Administrative, Professional, Computer Employee, and Outside Sales.
The category that gets most employers in risky situations is the Administrative exemption. “Administrative” doesn’t mean the employee does administrative work; lots of employees do administrative work. The Administrative exemption only applies to employees where the primary duty includes the “exercise of discretion and independent judgment with respect to matters of significance”. Managers, HR Generalists, Marketing Specialists, Project Managers and Executive Assistants are just a few examples of positions that may be exempt under the Administrative exemption. However, it’s not about the title, but about what the position’s responsibilities include. For example, Executive Assistants often do not meet the duties necessary to be classified as administrative exempt.
There is also the Professional exemption for which the employee’s primary duty is the performance of work requiring advanced knowledge — defined as work which is predominantly intellectual in character and which includes work requiring the consistent exercise of discretion and judgment, among other things. This category would include teachers, accountants, therapists, and social workers, to name a few. It also includes creative professionals like artists and actors.
Now that we have a bit of a background on whom, how, and why employees are classified as non-exempt or exempt, let’s touch on the mind set change one must make when transitioning from an hourly position into a salary position.
As non-exempt employees move up the career ladder, or move into more white-collar positions, they may glimpse the more perceived glamorous work-life of employees who are salary exempt. For example, it may seem as though they come and go as they please and have quite a bit of flexibility. What the hourly employee may not see is the less glamorous side of an exempt employee’s work life, which entails working longer hours, including weekends, and having to be “on call” much of the time to check on emails and take phone calls without any additional compensation.
While there are some perks in regard to flexibility, as well as some protections under the law, the exempt employee may find themselves sort of “on the clock” a lot of the time. This is not unusual. Once an employee becomes exempt, it’s about getting the work done and making sure the responsibilities are always attended to, regardless of the time it might take.
It isn’t uncommon for employers to require their exempt employees to work 45, 50, 55 or more hours a week, and they legally can do that. It may not make for a happy employee, but at the very least, the employer expects their exempt employees to jump in and work those long hours when they are required to do so.
In addition, if the exempt employee calls in sick or takes a vacation, the employer can require the employee to use their sick, vacation or PTO time when available. If they have no paid time off balance available, and they work only a partial day, the employer is still required to pay them for the entire day. It’s only when the exempt employee misses an entire day of work and has no available paid time off that the employer is permitted to deduct those hours from their paycheck.
Exempt employees typically have positions where they have more responsibility, accountability and influence in the company. They aren’t watching a clock or counting down the minutes until they can leave for the day. They must learn how to manage their time effectively so that they are able to attend their work responsibilities while still maintaining a work-life balance. The company culture contributes greatly to how many hours an exempt employee might work, but some onus is on the employee.
These types of expectations are in stark contrast to a non-exempt employee, who typically can stop working when they clock out, and then they don’t have to work again until the next time they clock in.
Being an exempt salary employee does have its perks. If there is an urgent need to run out of the office for an errand or a doctor appointment, exempt employees may not need to use PTO time to fill in the gap. This is because often they are able to work around their schedule while continuing to complete the necessary job responsibilities. However, an employer can require them to use the available paid time off to make up for those hours when needed.
Another common scenario is when exempt employees hardly take vacation or personal time off and are always working on the nights and weekends. More often than not, they are checking emails, texts and voicemails to make sure things are being attended at all times. While this may seem productive at first glance, research shows these employees can often be at a higher risk for burn out. As such, it’s important for employers and employees to set boundaries and try to find the well-deserved work-life balance.
To conclude, any employee, at the right time, can be transitioned to an exempt salary position, but only the right mindset will enable the employee to thrive and bring tangible, productive results for the company and their own professional growth.
Holly Young SPHR, MA HR Business Partner
Sara Jacobs HR Business Partner
Updates to Article 5.24.2021
On April 28, 2021, the Department announced a final rule (Partial Delay final rule) delaying the effective date of three portions of the 2020 Tip final rule for eight months, until December 31, 2021. For more information, please visit https://www.dol.gov/agencies/whd/flsa/tips
On March 11, 2021, the Department of Labor (Department) announced a Notice of Proposed Rulemaking (NPRM) to rescind its regulations interpreting joint employer status under the Fair Labor Standards Act. For more information please visit: https://www.dol.gov/agencies/whd/flsa/2020-joint-employment.
On May 5, 2021, the Department announced a final rule withdrawing the “Independent Contractor Status Under the Fair Labor Standards Act” final rule (Independent Contractor Rule). For more information, please visit https://www.dol.gov/agencies/whd/flsa/2021-independent-contractor.