The federal Fair Labor Standards Act (FLSA) provides that certain employees are exempt from the Act’s minimum wage and overtime requirements. This is the origin of the term “exempt employee.” The FLSA contains specific criteria for determining whether an employee is exempt. If those criteria are not met, the employee is nonexempt. In addition to meeting those criteria, exempt employees must be paid on a “salaried basis,” which means being paid the same amount each week regardless of the number of hours worked in the week.
The employee must be paid a guaranteed minimum amount that is not subject to being reduced based on the quality or quantity of work performed. There are some limited situations where an exempt employee’s pay can be reduced. Numerous cities and states have local laws for minimum wage and overtime exemption. For example, Illinois, Minnesota, and Wisconsin have state laws defining exempt employees, and employers in those states must generally follow the law or provisions of the law that are most favorable to the employee.
With exempt employees, greater emphasis is placed on meeting the responsibilities assigned to the position than on working a specified number of hours. Some employers treat exempt employees like nonexempt employees in terms of their working conditions, such as office hours, lack of flexibility, and supervisory oversight. Although not a violation of the FLSA, these practices are inconsistent with the expectation of an exempt position.
The term “exempt” is not synonymous with “salaried,” and similarly, the term “nonexempt” is not synonymous with “hourly.”
