All companies are required by federal law to designate their employees as exempt or non-exempt according to The Fair Labor Standards Act. Also known as FLSA, the law was originally enacted in 1938 to protect worker rights, establish the minimum wage and govern overtime pay. Amended every so often to reflect current business laws, FLSA covers hourly full- and part-time employees and establishes criteria for salaried workers.
Non-exempt employees are thus named because they are not exempt from FLSA laws. Non-exempt employees are paid hourly and enjoy overtime pay for hours worked above 40 hours per week at a minimum of one and one-half times their normal hourly pay. Some states and companies may have FLSA-allowable variations such as increased minimum wage, decreased full-time work week hour designations, and more-generous overtime policies, but must at least adhere to the minimums set by the law.
Exempt employees are those who are exempt from FLSA overtime laws, but must meet FLSA classification criteria: Exempt employees must be paid on a salary basis of least $23,600 per year, work in FLSA-defined job types and do not generally receive overtime. These jobs are usually in sales, administration, management, supervisory, executive and other positions as defined by the FLSA. The decision to classify any employee as exempt is largely up to the hiring company as long as FLSA guidelines are followed.
Benefits of Non-Exempt Employment
Benefits of non-exempt employment vary with the job and industry, particularly where overtime for full-time employees is abundant. In manufacturing, service and other industries where regular, seasonal or periodic overtime is the norm, employees can add substantially to their paychecks. Non-exempt employees also benefit by having the FLSA on their sides in case their employer is not playing -- or paying -- by the rules.
Drawbacks of Non-Exempt Employment
Regular or periodic overtime hours for any non-exempt employee is not guaranteed nor mandated by the FLSA or any other law except perhaps in some instances involving trade union contracts. In times of company slow-downs, workers who are used to regular overtime pay can sometimes experience financial hardships.