Exempt Vs. Non-Exempt Accounting Roles

An accounting employee should be classified as exempt or nonexempt based on her job duties, as defined by the Fair Labor Standards Act or state law. Sometimes you can correctly guess whether an employee is exempt or nonexempt based on his accounting title. However, you should not assume, because an employee can appear to be exempt or nonexempt when he’s actually the other.

An accounting employee who performs executive, professional or administrative duties as defined by the FLSA is exempt. To qualify for exempt status, an administrative accounting employee’s main duty must be performing non-manual work directly linked to your customers or the overall management of your company. She must also frequently use personal discretion and judgment while performing her job. An executive accounting employee who has the authority to hire and fire other workers, whose main job is managing the company or a division within it, and who has at least two full-time employees working under her is exempt. To qualify for professional exemption, an accounting employee’s main duty must require advanced knowledge. She must have undergone prolonged specialized training in her area of practice and use personal judgment and discretion frequently on the job.

An accounting employee who does not perform the job duties required for exempt status is nonexempt. A nonexempt employee typically performs routine work with specific rules and standards. Under federal law, these employees must receive overtime if they work more than 40 hours per week, regardless of whether they are paid on a salary or hourly basis. You do not have to pay exempt employees overtime. An employer can face audits and fines from the federal or state labor department if it tries to reduce overtime costs by switching a nonexempt employee to exempt.

A chief financial officer or comptroller who manages two or more employees is exempt. A certified public accountant who does professional accounting work is exempt, but a CPA who does only ordinary bookkeeping is nonexempt. For example, a bookkeeper who only handles delinquent accounts is nonexempt because he does not frequently exercise personal discretion or judgment. A staff accountant with specialized training and who uses personal judgment and discretion often is exempt, but an accounting assistant or clerk is nonexempt.

Some states follow FLSA guidelines for classifying employees. Others have their own requirements. Employers should consider both federal and state laws where applicable. For example, employers in Arizona must apply FLSA exempt rules, but employers in California must consider both federal and California law. In addition, under the FLSA, salaried exempt employees must receive no less than $455 per week, as of 2018, but the state may have a different salary requirement. In Arizona, exemption for professional, administrative and executive employees does not exempt the employee from receiving the state minimum wage, which was increased to $10.50/hour as of January 2018.

Figuring exempt or nonexempt status is a complex issue, as you must consider all aspects of the employee’s job duties and weigh them against the legal requirements. For clarification, contact the U.S. Department of Labor, Wage and Hour Division, the state labor department, an employment consultant or lawyer.