The Department of Labor is charged with protecting the rights of workers, improving working conditions and enforcing workers rights in the workplace. The department is responsible for enforcing the Fair Labor and Standards Act (FLSA), the controlling authority on certain labor laws. The characterization of employees as exempt or non-exempt is a function of the FLSA. The labels arose because an individual is either exempted from the protections offered by the law (exempt) or not exempted (non-exempt).
The U.S. Department of Labor’s Fair Labor Standards Act sets the standard for overtime pay, minimum wage, record-keeping and child labor laws for full and part time workers. Some workers are considered exempt from the overtime pay provision rules and/or the minimum wage provisions. A non-exempt employee must receive at least the minimum wage and overtime pay. Being considered exempt or non-exempt is not the same as being an hourly or salaried employee.
A salaried employee receives a predetermined amount of pay on a regular basis. The amount of pay cannot be reduced because of working fewer hours and the employee must receive the same minimum salary even if he doesn't work his full number of hours. If the worker’s pay is reduced when her hours are reduced, she is not salaried. An hourly employee is paid for each hour worked. Hourly employees will receive less pay if they work fewer hours.
Many employees are considered exempt from FLSA protection. The main categories of exempt employees include executives, some administrators, licensed professionals (doctors, lawyers etc.), computer analysts, programmers and software engineers. Exempt administrative employees must be engaged in office work in support of the business and they must perform their primary duties with little direction. Since there are other categories of exempt employees, a business needs to understand FLSA guidelines thoroughly when classifying employees.
Non-exempt employees include both hourly and salaried employees. The definition of exempt and non-exempt has more to do with an employee’s responsibilities than whether she is salaried or not. Salaried employees can be either exempt or non-exempt. Sometimes a company will put employees on salary to facilitate their payroll processes or for other reasons. This does not make that employee exempt. Non-exempt salaried workers must report, and be paid for, their overtime hours.