Anna Keizer
March 2, 2022

Exempt vs. Non-Exempt Employees: Learning the Differences

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On every employee job listing, you’ll notice that some positions are exempt while others are non-exempt. The difference between exempt vs. non-exempt employees is fairly straightforward: exempt employees are exempt from overtime pay.

As a job seeker, understanding the difference helps determine the calculations for how you’ll get paid. But, for an employer, accurately classifying employees as exempt or non-exempt carries a much greater burden.

Not only can misclassification result in heavy fines, but without a firm grasp on the distinctions, you can’t accurately gauge how much payroll will cost. Even with decades of business experience under their belt, hirers can sometimes get tripped up on the finer details of what makes an employee exempt or non-exempt.

That’s why today we’re talking about what the key differences between exempt vs. non-exempt employees are with plenty of examples along the way.

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What’s an exempt employee?

In the simplest terms, an exempt employee is a worker, who is said to be exempt from receiving overtime pay. That means no matter how many hours an employee works over the usual 40 hour work week, they are not entitled to overtime. Go deeper into how overtime pay works with exempt vs non-exempt employees below.

In order to determine whether an employee is said to be exempt, employers must carefully weigh two factors: compensation and position, followed by the type of exemption...

COMPENSATION

Exempt employees are not subject to minimum wage laws, and there’s a specific reason for it: in order to be considered exempt you have to make more than the minimum wage, most are usually paid out on a salary.

As of January 1, 2020, the Fair Labor Standards Act stipulates that someone working in an exempt position must be paid at minimum $684 per week, or $35,568 per year. Note, however, that the FLSA determines only federal labor laws.

Each state has its own state labor laws, which affect exempt employee status. Check out Wrapbook’s guide on state overtime laws to determine non-exempt position meaning among states.

POSITION

When sorting out what makes an employee exempt or non-exempt, an employer must also consider the type of tasks that person is required to do.

In addition to making more than minimum wage, an exempt employee’s work must be considered: administrative, computer-related work, executive, outside sales, or professional. We'll touch upon these below.

It’s crucial to note that title alone does not mandate exempt or non-exempt employee status – working in an office likewise is not absolute!

To satisfy exempt qualifications, an employee must check off both of the above boxes of getting paid at least $684 per week and having a job that falls into one of these categories. To satisfy exempt qualifications, an employee must check off both of the above boxes of getting paid at least $684 per week and perform work in one of these categories.

In other words, “What’s an exempt employee?” is often comparable to “What’s a white-collar employee.”

However, like any government regulation, there’s always nuance. Within each category, you need to meet certain requirements for exempt employee status.

ADMINISTRATIVE EXEMPTION

In order to meet the administrative exemption requirements, your employee must perform office or non-manual work that directly ties to management and/or general business administration.

Additionally, the employee must be making decisions independently more than 50% of the time and require general supervision. The job may also require unique training.

EXECUTIVE EXEMPTION

In order to meet the executive exemption requirements, your employee must manage a department or part of a department. And like the administrative requirements for exempt employees, your employee must also be making decisions independently more than 50% of the time.

An exempt executive employee must also supervise two or more full-time employees and be able to hire and fire employees.

PROFESSIONAL EXEMPTION

In order to meet the professional exemption requirements, your employee must be performing work that requires extensive training and is creative in nature.

Additionally, this employee must also be making decisions independently more than 50% of the time.

COMPUTER-RELATED

This stays fairly general, as anyone completing computer-related work. To meet the requirements, any computer employee who is compensated on a salary or fee basis at a rate of not less than $684 per week.

OUTSIDE SALES

Another requirement are those working as outside salespersons. For more on how these exemptions are codified, see 29 CFR part 541.

What are examples of exempt employees?

When it comes to exempt vs. non-exempt employees, title and even whether or not you work in an office doesn’t matter. What matters is what you’re being paid and the responsibilities of your job.

Let’s take a retail department store for instance.

If the employees who restock inventory make minimum wage, then they would be non-exempt employees. If they had to work extra before Black Friday, they would get paid overtime as soon as they hit the minimum needed in their state.

Their managers could be classified differently. If the managers make above minimum wage and spend half of their time performing office work (validating timecards, emailing out to vendors, writing checks), then they could be considered exempt.

That means, in the lead up to Black Friday, they wouldn’t receive additional compensation for working more than 40 hours. However, if the managers didn’t spend more than half of their time exercising independent judgement, then they could be classified as non-exempt and log that overtime pay.

PRO-TIP: HIGH COMPENSATION USUALLY MEANS EXEMPT STATUS

Another category to keep in mind for exempt vs. non-exempt employees is high compensation. A weekly salary of $684 might be the bottom threshold for exempt employees, but because of their specialized skill sets, many people in these positions often earn far more than that.

Think about doctors, architects, attorneys, and other jobs your parents probably asked to you to consider growing up.

What is a non-exempt employee?

If an exempt employee is not entitled to overtime, you probably have an idea of what a non-exempt employee is.

In short, an employee in a non-exempt position is not exempt from getting overtime, or said another way, they get overtime.

The double negatives can get a little confusing, but what it boils down to is that someone in such a position is liable for overtime should they work more than the standard 40 hours in a single week or the set number of hours required per day in their state.

For that reason, an employee in a non-exempt position isn’t brought on board with a yearly salary; instead, they have an hourly or day rate, which makes it easy to calculate their non-exempt employee overtime should they exceed the state’s overtime laws.

COMPENSATION

Pay is important in more ways than one in a discussion of what does non-exempt from overtime mean. A critical reason why non-exempt employee overtime exists is because these types of employees aren’t protected by the federal minimum weekly pay as outlined in the FLSA.

Consider the weekly minimum needed for an exempt employee is $684. Factoring in a typically 40-hour work week, that comes out to be $17.10 per hour. In contrast, the Federal Minimum Wage is just $7.25 per hour.

So unless a non-exempt employee works in a state with a higher state minimum wage, in which case they’re owed the higher of the two wages, they may be paid significantly less than an exempt employee.

Exempt vs Non Exempt Employees - State Law Changes - Wrapbook
Be sure to follow local law labor changes to determine non-exempt position meaning among states.

When classifying exempt vs. non-exempt employees, employers must follow the above guidelines. The mislabeling of a worker could be incredibly costly otherwise.

Are there differences for exempt vs. non-exempt employees across states?

Which state your employees are working in matters greatly when it comes to exempt or non-exempt stipulations.

States have their own set of laws for everything from how to file for unemployment to how to determine exempt vs. non-exempt employees. To be legally compliant, employers must obey both federal and state laws, which isn’t all too difficult as long as employers follow the more stringent set of regulations.

But to break down how this might affect an employer’s bottom-line, let’s look at California and New York, two states that fall within the top five with the highest number of employed persons.

What is an exempt vs. non-exempt employee in California?

What makes an employee exempt or non-exempt in California are largely the same stipulations given by the Fair Labor Standards Act. For instance, exempt employees typically work in the administrative, computer, executive, outside sales or professional fields.

However, when it comes to minimum pay for an exempt vs non-exempt employee in California, the state has very specific guidelines.

Namely, an exempt employee must earn no less than two times the monthly salary for minimum wage at full time employment. Also, California is indeed one of those states with a minimum wage higher than the federal one; in fact, its current minimum wage is $14 per hour for employers with 25 or less employees and $15 per hour for those with 26 or more employees. Some quick math yields that an employee in California must make no less than approximately between $4,480 and $4,800 per month to be considered exempt.

And for the employer making the decision of an exempt vs. non-exempt employee in California, should they categorize an employee as non-exempt, the minimum amount owed to that person is either $14 or $15 per hour—not the federal minimum wage of $7.25 per hour.

WHAT IF A WORKER HAS SOME ADMINISTRATIVE DUTIES?

One last note on what makes an employee exempt or non-exempt in California.

Let’s say someone does administrative, outside sales or another form of work that typically falls in the exempt category, but that’s only part of their responsibilities. What then?

In such cases, the employer must determine if those duties make up at least fifty percent of their working hours. If so, they’re exempt.

If it’s unclear whether the scope of an employee’s job falls into administrative, computer or another exempt category, the employer should consider the decisions they’re making in that position. Are they exercising independent judgment? Are they required to use discretion? If yes, then odds are they too are exempt.

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What is an exempt vs. non-exempt employee in New York State?

Like the laws set forth by the federal government and California, the designation of an exempt vs. non-exempt employee in New York depends on the nature of the work they perform.

If someone works in the administrative, executive or computer fields, they’re exempt. In addition, New York law states that if an employee makes a salary of $100,000 or more a year, and they work in the administrative, professional or managerial fields, they’re exempt, too.

However, $100,000 is just one number to keep in mind. Another is $990 per week.

That’s because $990 per week is the minimum an employee must make to potentially be considered exempt.

That adds up to $51,480 a year. So yes, even those making just over half of $100,000 can still be exempt from getting overtime pay.

These rates are for New York State - excluding New York City and Nassau, Suffolk, and Westchester counties. Those have different rates.

WHAT ABOUT NYC, NASSAU, SUFFOLK, & WESTCHESTER?

When it comes to an exempt vs. non-exempt employee in New York, an important question to ask yourself is where you’re hiring in New York State.

Exempt vs Non Exempt Employees - New York - Wrapbook
Where exactly the employee is performing the work determines exempt vs. non-exempt position meaning in New York.

For employers hiring employees with 11 or more employees in New York City, the salary threshold is $1,125 per week or $58,500 per year. And this is the same for 10 and fewer employees.

For Nassau, Suffolk, and Westchester counties, the threshold is the same as NYC regardless of size of employer.

If an employee is non-exempt and works in New York City, the minimum wage they are owed is $15 an hour. If they’re non-exempt and work in Westchester county or Long Island, it’s also $15 an hour. They work somewhere else in the state? Then it’s $13.20 an hour.

Does the film industry make distinctions for exempt vs. non-exempt employees?

Especially for the producers of a film, television show, commercial, and all other entertainment-related projects, it’s key to be aware of what makes an employee exempt or non-exempt.

Why the spotlight on producers? Because in addition to the many other hats that those in this position wear, being compliant for all exempt and non-exempt laws falls on their shoulders as well according to the Department of Labor.

Just as with positions in other fields, job title alone does not determine exempt or non-exempt status in the film industry.

That being said, the following positions could be considered exempt:

  • Art Director
  • Casting Director
  • Construction Coordinator
  • Costume Designer
  • Director
  • Director of Photography
  • Electric Dept. Head
  • Film Editor
  • Grip Dept. Head
  • Illustrator
  • Location Manager
  • Makeup/Hair Stylist Dept. Head
  • Production Accountant
  • Production Office Coordinator
  • Producer
  • Prop Dept. Head
  • Set Decorator
  • Still Photographer
  • Transportation Coordinator
  • Unit Production Manager
  • Visual Consultant
  • Writer

In looking over the above list, there’s one commonality—and it’s not working in an office! Rather, it’s that to be a film editor, still photographer or any other job indicated above, it takes a specific skill set gained through specialized training. In addition, many of these roles do exercise independent judgement or run departments. Hence, exempt status. However, there might be times you'll pay them as non-exempt if a union stipulates they get paid in such a manner.

Those responsible for determining exempt vs. non-exempt employees must adhere to both federal and state laws. We’ve discussed the general stipulations of California and New York, two states known for the high number of projects produced there; however, should a producer decide to shoot on-location elsewhere, those state laws must be adhered to instead.

That’s one reason why many turn to entertainment payroll services, like Wrapbook, to help determine exempt or non-exempt position in the film industry. If you're a producer who already uses the software, you know you can easily select what type of worker each crew members falls into.

Exempt vs Non Exempt Employees - Wrapbook
Select union status, worker type, and more to determine appropriate calculations for each crew member using Wrapbook.

But even if you don't use an entertainment payroll service, you can always reach out to one of Wrapbook's payroll specialists to answer any and all questions you may have about exempt and non-exempt employees.

What’s a quick and easy exempt and non-exempt test?

What we’ve discussed encompasses quite a bit of information. But to remember the differences between exempt vs. non-exempt employees, let go back to the basics.

WHAT’S AN EXEMPT EMPLOYEE?

Commit to memory these two considerations: pay and position. If the employee in question is getting paid at least $684 per week and they work in the administrative, computer, executive, outside sales or professional fields, odds are they’re an exempt employee.

Exempt vs Non Exempt Employees - Exempt Employee Image - Wrapbook
Not all exempt employees wear ties, but those that do may be exempt employees.

If it’s still not entirely clear how to determine exempt vs. non-exempt employees, especially in terms of job category, consider if any formal education or specialized training was necessary for it. It may also help to determine if an employee receives high compensation.

WHAT’S A NON-EXEMPT EMPLOYEE?

Though many non-exempt employees can make far more than $684 per week, are they also part of the administrative, computer, executive, outside sales or professional fields? Perhaps they’re a copywriter, graphic designer or social media expert. In such cases, there’s a good chance they’re in a non-exempt position.

But don’t forget the state laws for exempt vs. non-exempt employees!

Exempt vs Non Exempt Employees - Non Exempt Image - Wrapbook
Crew members on set are often non-exempt employees, but that isn't always the case.

That’s a tipping point for many employers. But being compliant according to both federal and state laws doesn’t have to be complicated; many states have their department of labor stipulations detailed in simple terms to help those in hiring positions to determine exempt vs. non-exempt employees.

Why does exempt vs. non-exempt status matter to employers?

As discussed, knowing whether your employees are exempt or non-exempt can be the difference between staying compliant and getting slapped with fines from the government.

However, many employers are interested in how exempt vs. non-exempt employees can impact their financial bottom-line. As such, here’s one more defining factor of those in exempt positions: they do not qualify for overtime pay according to the Fair Labor Standards Act.

Here’s another way of looking at it… Say an exempt employee is paid a $50,000 yearly salary. Whether their job requires 40 hours or 65 hours on the job in a given week, that $50,000 stays the same. If they go over the standard weekly number of work hours, they do not receive any additional pay.

As a result, if we circle back to an employer’s bottom-line, correctly determining exempt or non-exempt status could mean a payroll difference of hundreds if not thousands of dollars.

What does non-exempt from overtime mean in more concrete numbers? Well, according to the Fair Labor Standards Act, non-exempt employee overtime equates to one-and-a-half times the pay per hour for each hour over 40 worked in a given week. So for a person who normally earns $15 per hour, that’s $22.50 per hour of overtime.  It's helpful to reach out to professionals to ensure all is well before payment goes through.

Wrapping Up

Knowing these rules is critical to staying compliant. An employer of record payroll service can help you figure out the distinctions for your employees when you sign up.

If you need more info about law-compliant payroll services, reach out to a specialist at Wrapbook. No matter how big or small your production, a payroll service should always see to it that you adhere to all federal and state laws without getting a headache—or spending more time than you should.

Disclaimer

At Wrapbook, we pride ourselves on providing outstanding free resources to producers and their crews, but this post is for informational purposes only as of the date above. The content on our website is not intended to provide and should not be relied on for legal, accounting, or tax advice.  You should consult with your own legal, accounting, or tax advisors to determine how this general information may apply to your specific circumstances.

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About the Author

Anna Keizer

Anna Keizer originally hails from the Chicagoland area. After receiving her B.A. in Film/Video from Columbia College Chicago, she moved to California and finished her M.A. in Film Studies from Chapman University. She has also graduated from UCLA’s Writing for Television Professional Program and is currently in post-production on the short She Had It Coming, which she wrote and is executive producing.

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