When is an Employee Exempt? Guidelines for Determining if an Employee is Entitled to Overtime

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Exempt or non-exempt is one of the major distinctions that employers have to make about employees and affects how an individual is paid. Exempt means that a person is exempt from the requirements of the Fair Labor Standards Act and thus will not receive overtime.

In a nutshell, exempt employees are those who carry out professional, executive or administrative jobs and those who are commissioned salespersons, although many other exceptions exist. Characteristics of exempt types of jobs include the exercise of discretionary powers and independent judgment, the ability to hire and fire other employees, supervisory authority, and a job that requires knowledge in a field of learning customarily acquired by specialized study, such as a lawyer or physician.

Sometimes, even though an employer calls someone “exempt,” the duties of the job speak otherwise. Starbucks told its “managers” that they were exempt because they were managers. But the courts looked at the duties the “managers” performed and found that they spent only 10% of their time on managerial duties. The remaining 90% was spent doing the same work as the other baristas. Starbucks violated the law when it failed to pay these individuals overtime. Employers who violate the FLSA have to pay the unpaid overtime and also risk civil penalties. It is always recommended that a business look carefully at the job duties and then pay accordingly.


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