Exempt vs. Non-Exempt Employees: How to Classify Appropriately

Employment laws are typically among the many new measures that go into effect at the beginning of every year, but 2020 brings one that’s key for Georgia employers. The US Department of Labor (DOL) announced important revisions to regulations regarding exempt versus non-exempt employees, a distinction that was one of the most complicated issues in federal wage and hour law even before the recent modification. In general, classifying an employee in one group or the other imposes certain requirements upon an employer when it comes to overtime under the US Fair Labor Standards Act (FLSA).

However, there’s much more to the issue of categorizing exempt and non-exempt employees – and, at the same time, there are serious consequences for noncompliance. You can protect your company by working with a Georgia wage and hour lawyer on how to classify properly, but take time to review some fundamental concepts.

Overview of Exemptions: For purposes of the FLSA, the classification of employees as exempt or non-exempt triggers requirements involving wages and hours – specifically those that relate to overtime pay. Because the Georgia Department of Labor follows FLSA regulations, an employer must comply with the following rules:

• Non-Exempt Employees: It’s mandatory to pay non-exempt employees overtime at a rate of 1.5 times their regular wage when they work more than 40 hours in a work week.
• Exempt Workers: Employers can avoid paying overtime to these employees, because these workers are exempt from this requirement.

The reason that exemptions have made headlines recently is that the DOL revised the initial, crucial distinction between exempt and non-exempt employees: The worker’s minimum salary. Previously, the minimum salary for exempt employees was $455 per week, which is $23,600 per year. An employer could avoid paying overtime to anyone making more than this amount. As of January 1, 2020, employees who make $684 weekly or $35,568 annually are considered exempt. Data indicates that around 1.3 million additional workers will now qualify for overtime.

Assessing the Exempt or Non-Exempt Classification: The change in wages is just the first factor that separates exempt and non-exempt workers. There are additional considerations that put the focus on the employment arrangement, job duties, and other details – which is where many Georgia employers might make mistakes with classification. It’s essential to weigh the aspects of the work relationship, including the employer’s input regarding the details of job-related tasks. The details are quite complex, but there are a few basic tests to distinguish between different classifications of employees:

1. Control: This refers to the extent to which the employer has control over the steps or stages of the worker’s tasks, and whether the company dictates how he or she completes projects.
2. Financial Implications: Another consideration is the degree that a company controls pay for the work performed by the employee.
3. Relationship: This element considers the details regarding how the employee and employer interact through the business relationship. Health insurance, a pension or retirement plan, and other benefits are included in the evaluation.

Special Considerations: In connection to the tests described above, it’s also important to note a few factors regarding certain employees.

• Most workers who occupy positions as executives, administrators, computer employees, salespeople, and professionals are exempt from the FLSA overtime pay requirements.
• Only executives, administrators, and professionals who are paid on a salary basis will qualify as being exempt.
• Employers are allowed to use nondiscretionary bonuses, commissions, and other incentive plans to satisfy the exemption amount of $684 per week or $35,568 per year salary level. However, the maximum applied amount cannot exceed 10 percent.
• Actual job duties are the focus when determining exemptions, not the title or job description.
• The existence of an employment contract designating a worker as exempt or non-exempt is not the sole determinant of classification.
• The rules are different for highly compensated employees, so-called “blue collar” workers who perform duties involving repetitive operation, police, firefighters, and other first responders. Exemptions do not apply, so employers will always be required to pay overtime for these workers.

Contact a Georgia Employment Law Attorney Regarding Classification Issues

This overview of classifying exempt versus non-exempt workers may be useful, but it’s no replacement for the solid experience and legal counsel a skilled lawyer brings to the table. Our team at the Vaughn Law Firm can advise you on the details to ensure you remain in compliance with FLSA and related employment law regulations. Please contact our office to schedule a free consultation today. Our attorneys serve clients throughout DeKalb County, Fulton County, and Cobb County from our office in Decatur, GA.