Deputy Glossary

Hourly Employees? Easy Employee Scheduling and Time and Attendance (Clock In/Out)

What Does It Mean To Be Exempt From FLSA?

The Fair Labor Standards Act (FLSA) has made two distinctions between a company or organization’s employees: exempt and non-exempt. To be considered exempt from FLSA, an employee must not receive overtime pay whether they work more than 40 hours a business week or not. This is typical of salary employees who will not keep a timesheet or record of the hours they work during a business week as long as their annual salary is equal to or greater than $47,476.

Whereas, a non-exempt FLSA employee is not exempt from the FLSA overtime pay rule and is usually paid by the hour. A non-exempt hourly employee will use a time sheet to track and record their labor hours to ensure that they are compensated at a rate equal to time and a half for hours worked over 40 hours in a business week.

For an employee to be considered exempt from the FLSA overtime pay statute, their job position must be governed by the FLSA. Jobs governed by the FLSA and considered exempt are decided by the employee’s annual income, whether the employee is paid hourly or salary, and the work considered for the job position. Though typically so, employees are not always considered exempt when they receive an annual salary; an employee can be defined as exempt by their job definition. For example, if an employee is “outside sales” they are considered exempt whereas an employee who is “inside sales” is non-exempt.

The Fair Labor Standards Act (FLSA) was written by a body of legislation for two reasons: to protect a company or organization’s employees from being required to work extensive hours and not adequately compensated for their time, and to discourage employers from overworking their current employees and as an incentive to hire additional employees. In essence, the FLSA’s purpose was to either dissuade long work hours for those currently employed and more job opportunities for those unemployed, or provide higher income for employees.