The classification of exempt and non-exempt employee refers to the federal Fair Labor Standards Act. The most important difference is that non-exempt employees must be paid at least the federal minimum hourly wage and overtime at one and one-half the hourly rate, if they work more than 40 hours per workweek.
Exempt employees are sometimes called "white-collar" workers, named after the white dress shirts worn with a business suit. They are executives, company administrators, outside sales and professional employees who typically earn a salary or commission versus an hourly wage. With a few exceptions, the exempt employee must earn a minimum of $455 per week and must be paid his full salary every week without consideration for the number of hours worked.
Types of Exempt Employees
Under the FLSA, exempt job duties generally fall into one of three categories: executive, professional and administrative. An employee is considered an executive if she is required to manage two or more employees, her primary job function is management and her input can affect other employees, such as firing, hiring or promoting. Professional positions refer to jobs that require specialized education such as lawyers, teachers, accountants, doctors and scientists. Professional work is typically intellectual and often requires an advanced degree. An administrative position that qualifies as exempt would include duties that are necessary to company management or operations. To qualify the job must involve some independent judgment. Typical administrative positions include employees in human resources, finance, accounting, marketing and computer network administration.
Non-exempt employees are sometimes called "blue-collar" workers, named after the blue denim work shirts often worn by laborers. Any employee who does not fit the exempt category is automatically a non-exempt employee. Non-exempt employees usually receive an hourly rate, and their job duties are routine, following a specific set of rules and/or standards. Examples of non-exempt employees are maintenance and construction workers, clerical staff laborers and technicians. Care must be taken when determining if an employee is non-exempt by examining her duties against the standards set by the FLSA. It is the job duties and not the job title that sets non-exempt apart from exempt.
The definitions for exempt and non-exempt employee do not apply to jobs that are specifically excluded from coverage by the FLSA or are covered by another federal labor law. For instance, the FLSA rules for overtime to not apply to agricultural workers. Since railroad workers are covered under the Railway Labor Act, and truck drivers have coverage under the Motor Carriers Act, neither type of worker is covered under FLSA rules.