Are You Really Exempt?

Are You Really Exempt?

Are You Really Exempt?

One of the most common mistakes employers make is misclassifying employees. Qualifying exempt employees get salaries but not overtime pay. Nonexempt employees are usually hourly workers and sometimes misclassified salaried employees who must be paid overtime. If you’ve been misclassified as an exempt employee, your company may owe you money.

Exempt Standards

Federal employment law is clear on the issue, even if employers are sometimes fuzzy. Under the Fair Labor Standards Act (FLSA), you are considered an exempt executive if:
  • Your salary is at least $455 per week or $23,660 per year. In some states the wage may be higher. (In California, the minimum annual salary to be considered exempt is $33,280.)
  • Your primary duty is managing the enterprise.
  • You customarily and regularly direct the work of two or more other employees.
  • You have the authority to hire or fire other employees.
True, the $455-a-week bar is pretty low. (The law hasn’t been updated in a while.) But remember that to be exempt from overtime you must meet all four of these criteria. Basically, these rules leave VPs, directors and C-level staff members as the few truly exempt employees.

Nonexempt Exceptions

Before you start demanding overtime, make sure you’re not a nonexempt exception. Even if you don’t meet all of the above criteria, federal law says you are not entitled to overtime if you fall into one of these general categories:
  • Administrative: You exercise independent judgment and discretion performing nonmanual work that is directly related to business operations. Typical jobs: office manager, insurance agent, human resource professional and marketing personnel.
  • Professional: You have advanced knowledge in a field of science or learning through a prolonged course of specialized instruction (such as college, law school or medical school). Typical occupations: doctor, lawyer, dentist, professor and accountant.
  • Outside Sales: Your primary duties involve making sales away from your employer’s office. There is no salary qualification for this exemption.
In determining who really should be an exempt employee, the law considers job duties far more important than titles, according to Philadelphia-area employment attorney John Gallagher.

“It’s common to see managers whose primary duties are not managing people, outside sales people who spend most of their time at headquarters and administrative assistants who work with the CEO but don’t have any real autonomy,” Gallagher tells “Those people are often on a salary when they should be getting overtime.”

There are some other exemptions as well. Gallagher recommends becoming familiar with the FLSA to see whether any apply to you.

Correcting the Mistake

If you’re sure you’ve been classified as exempt when you’re really nonexempt, you can sue in your local federal court and collect unpaid overtime. If you win, you get $2 for every $1 the employer failed to pay to you.

However, you don’t need to end up in court. Before you call a lawyer, calmly point out the mistake to your employer and explain why you should not be on salary. “Employers -- at least the larger companies -- understand that the rules are very clear, and they tend to want to remedy the situation right away,” Gallagher says. “The problem often comes when smaller organizations can’t afford to pay what they owe you.”

If you are worried about retaliation, remember that it’s illegal to fire an employee for pointing out this error. Still, it’s smart to finesse the matter with your boss, so you get what you deserve without engendering hard feelings. Because there is strength in numbers, you might want to find out if any of your coworkers have also been misclassified as exempt. Even if your boss tries to retaliate against all of you, you’re doubly protected by the National Labor Relations Act and FLSA for engaging in a group activity, Gallagher says.

Still not sure what kind of employee you are? Learn more about the FLSA on the Department of Labor Web site.