One of the more complicated aspects of managing employees is determining if they should be paid by the hour with overtime, or salaried with no overtime. This can sometimes be challenging even to many HR professionals.
In accordance with the Fair Labor Standards Act (FLSA), employees must be categorized as either non-exempt (hourly) or exempt (salaried). The term ‘exempt’ comes from the regulation requiring payment of overtime (so an employee is “exempt” from the overtime requirement). There are strict regulations regarding overtime, and this is one area where many companies run into trouble. Basically, companies must ensure that employees are classified properly, and non-exempt employees are compensated for all hours worked.
The Department of Labor has an excellent tool, FLSA Overtime Security Advisor. Once you click on one of the exemption categories (e.g. executive, computer related occupations, etc.), you will be asked to answer a series of questions regarding the position you wish to classify. If you’re not sure which exemption to start with, you may begin with the occupational index. This index of job titles and duties is provided as a guide to help users of this tool to determine where to begin their analysis of exempt versus nonexempt status of a particular employee.
Please note that wage & hour violation lawsuits are THE main area of litigation against companies these days, and is expected to grow. In 2010, just the top 10 wage & hour settlements totaled nearly $364 Million. For more background, search “overtime violation lawsuits”.