The Fair Labor Standards Act, or FLSA, of 1938 requires employers to pay a minimum wage and overtime pay at one and a half times the regular rate of pay for all hours worked over 40 in a work week. Hourly paid workers are covered by these provisions. Most salaried employees, however, are exempt from the standards, as long as they meet certain requirements for exempt classification. The U.S. Department of Labor enforces and administers these requirements.
First, an employee must be receive a salary basis to be considered exempt. A salary means the worker has a guaranteed minimum amount of pay she receives for any work week, regardless of the actual work performed. This amount doesn't need to be the entire amount of compensation received, but it must be at least $23,600 per year, or $455 per week, at the time of publication.
An employee is exempt only if she performs exempt job duties. These job duties are broadly classified as executive, professional and administrative. Executive job duties include hiring, firing and managing other employees. Professional duties are predominantly intellectual, require specialized education and include the exercise of discretion and judgment. Administrative duties are non-manual tasks that usually involve more significant business matters. Sales positions are classified exempt by definition.
An exempt employee is generally not protected by the FLSA overtime rules. The only substantial protection is to receive the full base salary amount in any work period during which an employee performed any work, less any permissible deductions. The FLSA does not prohibit an employer from requiring exempt employees to record hours worked, or work a particular schedule, or make up time lost due to absences.
Non Exempt Implications
Hourly employees are not exempt from the FSLA standards, which mean they must receive a minimum hourly wage and one and a half times their standard hourly pay rate for hours worked over 40 in one work week. If the state minimum wage is different than the federal minimum wage, the worker must get the higher of the two rates. Additionally, all hours worked must be recorded and paid appropriately to comply with FLSA requirements.