To Be or Not To Be Exempt, and Why it Matters

There’s been a lot of buzz this year about the Fair Labor Standards Act (FLSA) raising the minimum salary thresholds for exempt employees. Effective July 1, 2024, the minimum salary was raised to $43,888 annually, and to $132,954 per year for Highly Compensated Employees.

Those rates are scheduled to increase respectfully to $58,656 and $151,164 per year on January 1, 2025. (This is currently being challenged in court.)

What’s the difference between Exempt and Non-Exempt?

Exempt employees do not qualify for overtime wages. They must be paid a salary at or above the minimum threshold established by the federal government or their state. They also must be employed in an administrative, professional, executive, computer, or outside sales role (there is no salary threshold for this role) and must meet a duties test established by the Department of Labor (DOL).

Non-exempt employees can be employed in any field or role, are entitled to at least minimum wage, and are eligible for overtime pay when they work more than 40 hours per week, or in alignment with the overtime guidelines established by their state or local government.

Why is this important?

Failure to properly classify employees, especially when it comes to non-exempt can adversely affect businesses. Here are just some of the negative consequences:

• The DOL can impose fines and penalties for misclassifications
• Employees can sue for unpaid overtime
• Diminished employee morale
• Damage to brand reputation

How do I know if my employees are classified correctly and how do I correct misclassifications?

First and foremost, you’ll want to explore the duties tests for the position as defined by the DOL (see link above). A current job description will help in this effort. If the employee’s duties don’t meet the test, they may need to be re-classified as non-exempt, and you may owe back wages for unpaid overtime.

If their duties meet the test, you’ll then need to verify if the employee’s salary meets the new minimum threshold. If it doesn’t, you have option of either increasing their salary or changing their classification to non-exempt.

With only a few months until January, you may want to also evaluate salaries in comparison to the 2025 minimums, and start planning for any changes which may be needed should the proposed salary increases go into effect.

Each of these scenarios requires delicate handling as they have unique components, including proper documentation, and potential pitfalls if not handled properly.

Don’t go it alone! HR Bee Partners can help. Please email us or click to schedule a free 20-minute consultation to discuss this or any other HR need you may have. We’re here to help your hive thrive!