Exempt vs Non-exempt Employee: Definitions, Differences & How to Determine

Employees who are paid more than $684 per week or $35,568 per year pass the salary level test to be classified as exempt and ineligible for overtime pay. In contrast, employees who make less than this are considered non-exempt and are eligible for overtime pay.

Although the Biden administration was unable to get the federal minimum wage increased to $15 per hour, many states are pushing to increase the minimum wage within their individual states. There are also a few states that, as of January 2022, have already increased the minimum salary threshold for exempt employees (above that set by federal rules). The law states that employers must follow the law that is most protective to employees. Some states that will overrule the federal laws in place include:

• California – The minimum salary level for exempt employees in California is $58,240 (for employers with fewer than 25 employees) and $62,400 (for employers with greater than 25 employees).
• Colorado – Exempt employees in Colorado must make a salary minimum of $45,000 (or $865.38 per week) to meet the salary level test.
• Maine – The minimum salary level for exempt employees in Maine is $38,250 (or $735.59 per week).
• New York – To qualify for exempt status in New York, employees must make a minimum salary of $51,480 (or $990 per week). NOTE: In the following areas, exempt employees must make a minimum salary of $58,500—Nassau County, Suffolk County, Westchester County, and within New York City.
• Washington – Exempt employees in the state of Washington must make a minimum salary of $52,743.60 (or $1,014.30 per week).

As long as your employee is paid consistently the same amount with very small variance, they would pass the salary basis test and be considered exempt since this would make them salaried (interpreted as such by the government). However, if an employee is paid hourly with pay that varies widely based on their work schedule and the hours provided, then they are to be classified as non-exempt.

Take note that there are exceptions, such as farmworkers and outside salespeople, whose jobs may be considered exempt even when they are paid hourly.

An employee who meets the salary level and salary basis tests are exempt only if they also perform exempt job duties considered to be executive, professional, or administrative. This is also referred to as a White Collar Exemption.

Keep in mind that job titles and job descriptions alone can’t determine whether this test is met. It is the actual job tasks that matter. For example, if you give someone the job title “Director of Facilities Operations,” but they are functioning as the janitor, doing maintenance and cleaning floors, this rule would require you to classify that employee as non-exempt. This test was put in place to prevent companies from circumventing overtime rules with inflated job titles.

Some examples of such job duties include:

• Executive: Requires that a person in the job role supervises two or more full-time employees. Management of employees is the primary task of the job, and the person in the job provides input on decisions affecting those team members—like hiring, firing, job promotions, or work assignments. Often, this includes people managers and sometimes supervisors.
• Professional: Includes jobs in “learned” and “creative” professions like doctors, lawyers, graphic designers, and engineers. These professional roles are generally considered to be exempt. Professional applies to those jobs that require an advanced degree past high school.
• Administrative: Jobs done while working on business support teams, like marketing, operations, accounting, or human resources, are considered administrative. These functions keep the business running and are often provided by office staff members providing support to the business.