Myth Busting: Exempt Jobs vs. Non-Exempt Jobs – Is One Better Than the Other?

Salaried, hourly, non-exempt, exempt, salaried non-exempt, exempt hourly, goodness gracious!

These are common terms in the world of compensation, but what do they mean?

These phrases are used to explain the frequency and form of payment for work performed. Different combinations of exempt, non-exempt, salaried, and hourly can be partnered together based on the nature of the job’s duties. All in all, it can be very confusing!

Perception

There is a pervasive myth that having a salaried job, or being an exempt employee, is somehow better or of higher status than being in a job that is paid hourly, or non-exempt. You have probably heard people joke about this in your organization or in past roles about "graduating" to an exempt position or feeling free from the burden of tracking their hours. In some cases, a non-exempt employee who is eligible for overtime can bring home more pay in a year than an exempt employee, depending on other job factors and specific circumstances.

But who decides if a position is exempt or non-exempt? Answer: The FLSA (Fair Labor Standards Act) and state laws. Let's start with what the FLSA is and what it governs.

The Rules

FLSA is shorthand for the Fair Labor Standards Act of 1938 where Section 13(a)(1) provides specific guidance on which jobs are exempt from minimum wage and overtime requirements set forth in the Act.

Exempt status is commonly referred to as the "white-collar" or executive, administrative or professional exemption. Three tests must be met to determine whether a role is exempt (from overtime and minimum wage) or non-exempt (meaning overtime is owed to the worker).

To quote Section 13(a)(1) of the FLSA directly, "…(1) the employee must be paid a predetermined and fixed salary that is not subject to reduction because of variations in the quality or quantity of work performed (the salary basis test); (2) the amount of salary paid must meet a minimum specified amount (the salary level test); and (3) the employee's job duties must primarily involve executive, administrative, or professional duties as defined by the regulations (the duties test). The employer bears the burden of establishing the applicability of the exemption."

A job's FLSA status has nothing to do with its overall importance to society, the organization, its clients, or the value of the person who holds the job. It is a legal determination created and enforced to ensure that an employee receives appropriate, fair and legally enforced compensation due to the nature of their job duties.

Positions must satisfy the professional, executive, or administrative three-part assessment (salary basis, salary level and duties tests) to be legally classified as exempt.

Job Titles

You may be surprised by which common roles are determined as exempt or non-exempt. A role can also be considered non-exempt but paid in the form of a monthly or weekly salary. Positions that you may not know are typically classified and paid as non-exempt roles:

• Police Officer
• Registered Nurse (RN)
• Assistant Manager

Are these roles less important or of a lower social status simply because they are classified as non-exempt? Of course not. We use social judgments to navigate our culture and society, but this doesn't mean our judgments are based in facts, hence the perception that being an exempt employee is of a higher status. Your work does not define you, but it does define your FLSA status!

Resources

Here are key government resources to learn more about the nuances of FLSA status and its determining factors:

• Oregon Bureau of Labor & Industries (BOLI)
• U.S. Department of Labor
• Washington State Department of Labor & Industries

If you need assistance determining whether a position is exempt or non-exempt, we'd love to be a resource to you. Please reach out for an FLSA review or discussion to ensure you have correctly categorized your organization’s jobs!