The failure to understand the difference between exempt and
non-exempt employees could be very costly to a business. Employees
improperly treated as exempt employees could be owed a significant amount
of overtime pay. There are several common questions that are asked regarding
this issue:
Is there a difference in paying an exempt versus a non-exempt employee?
Yes. A non-exempt employee is subject to all pay rules
established by the Industrial Welfare Commission (IWC). This includes
the payment of overtime.
Does paying an employees a salary classify them as exempt?
No. Non-exempt employees must be paid all overtime hours
that are worked, even if they are also paid a salary.
How can I determine if an employee is exempt or non-exempt?
The classification of one as an exempt employee depends on
the level of responsibility given to the exempt employee, or their status
as a professional. Exempt status has nothing to do with the employee’s
job title or paying the employee a salary rather than an hourly wage. The
following categories of employees are generally considered to be exempt from
the IWC rules:
- Licensed professionals. This includes doctors, lawyers, architects, engineers, and certified public accountants.
- Managers who hire, fire, and train, and who spend less than 50 percent of their time performing the same duties as their employees.
- Top administrators who create policies for a business.
- Outside salespersons.
