The Fair Labor Standards Act (FLSA) has stated that all employees are to be paid at least the Federal Minimum Wage and must be compensated extra for any hours worked beyond 40 per week. The act also allows for some job classifications to be exempt from this required overtime. The difference between Exempt and Non-Exempt has more to do with job duties than it does with the type of compensation the employee receives.
Determine what type of work the employee does. If an employee is charged with doing the actual tasks required to make a department run smoothly, then they are probably Non-Exempt. An example of this would be a retail clerk.
Determine what type of exemption the employee may fall into. There are five different types, Executive Exemption, Administrative Exemption, Professional Exemption, Computer Employee Exemption, Outside Sales Exemption.
Test the job duties for an Executive Exemption. The employee must be paid at least $455 per week, the primary duty must be management of a department, the employee must direct the work of others, and have the authority to hire and fire employees.
Examine the employee for the Administrative Exemption. For this, the employee must be paid at least $455 per week and have the primary duty of performing office work, which is related to the business and exercising independent judgment of significant matters.
Make sure the employee qualifies for a Professional Exemption. This exemption has an employee with compensation of at least $455 per week. In addition to that, the employee's work must require advanced knowledge in a field of science or learning which they had to have a long course of schooling to receive.
Determine the exemption for IT professionals. You must pay them at least $455 per week or at least $27.63 per hour. Also, this employee has to be a systems analyst, programmer, software engineer, whose duties include systems analysis to determine software specifications, and the development of programs based on user specifications or machine operating systems.
Test the eligibility of your outside sales force for exemption. This employee's primary duties are making sales or collecting orders for the company and regularly be away from the employer's office
The FSLA website (dol.gov/whd/Flsa/index.htm) has several worksheets for each classification. If you need to make a determination, you should look at these worksheets, which will help you get back into good legal standing.
Just because you pay an employee a salary (as opposed to an hourly wage) does not mean they are automatically an exempt employee. You must determine the status based on the job duties.