The Fair Labor Standards Act (FLSA) is a federal law that sets minimum wage and overtime requirements. The FLSA provides an exemption from both minimum wage and overtime pay for employees employed as bona fide executive, administrative, professional, computer, or outside sales employees. Exemptions are narrowly construed against the employer asserting them, and employers and employees should always closely check the exact terms and conditions of an exemption in light of the employees actual duties before assuming that the exemption might apply to the employee. The ultimate burden of supporting the actual application of an exemption rests on the employer.

Employees exempt from the FLSA typically must be paid a salary above a certain level and work in an administrative, professional, executive, computer, or outside sales role. The Department of Labor (DOL) has a duties test that can help employers determine who meets this exemption criteria. Exempt employees are paid an established monthly or annual salary and are expected to fulfill the duties of their positions regardless of the hours worked. They do not receive premium overtime, straight overtime, or compensatory time for working more than 40 hours in a workweek.

Non-exempt employees, on the other hand, are entitled to overtime pay for any hours worked over 40 hours in a workweek. Employers must pay non-exempt employees no less than time and one half their regular pay rate for each hour over 40 in a workweek. If a non-exempt employee isn’t paid by the hour, the hourly rate can be calculated by dividing the total compensation earned by the total hours worked.

To determine if a job is exempt or non-exempt, the FLSA uses five primary exemption tests: executive, administrative, professional, outside sales, and computer. All work is considered non-exempt until the employer completes an exemption test to document why overtime isnt required.