Exempt or Non-Exempt: What You Need to Know About the Misclassification of Non-Exempt Employees

Misclassification of non-exempt employees is a common problem in the workplace. Employers may either “inflate” your job title, make a mistake, or intentionally misclassify you, so they do not have to pay you overtime to save money on their bottom line.

Fortunately, federal law protects employees against this practice. The Fair Labor Standards Act (FLSA) serves as powerful legislation when an employee seeks legal recourse to recover the rightfully owed money.

What Is an Exempt Employee?

The term “exempt employee” is used to describe an employee who is not entitled to or “exempt” from overtime provisions of the law. An exempt employee must meet salary requirements as well as duty requirements. Exempt employees generally have some degree of authority or perform specific duties which render the employee exempt.

Some of the standard exemptions include:

The Executive Exemption – is one of the most popular and one of the most subject to misclassification. This individual must be primarily involved in business management and oversee at least two full-time employees (or their equivalent).

The Administrative Exemption – where work duties must be central to the operations of the business. Roles focused on filing, data entry, or other manual tasks are not exempt.

The Professional Exemption – this exemption contains two categories. The “learned professional” must have duties that are primarily intellectual in nature, such as those requiring extensive prior training/instruction. The “creative professional” is an individual with talent in a recognized creative field, performing work requiring imagination and originality.

The Computer-Related Exemption is a commonly abused misclassification of non-exempt employees with basic computer skills, such as people employed at a Help Desk. For this exemption to be valid, the worker must have a high degree of computer skills, including jobs such as a computer systems analyst, software programmer or engineer, or other similarly skilled information technology worker.

The Outside Sales Exemption – there is typically no weekly minimum salary for this exemption. Outside sales workers are often paid by commission only or commission plus bonus – and no overtime. These workers spend most of their time in the field to make sales.

Other types of workers can also be exempt from the protections of the FLSA, including individuals in retail services, newspaper delivery, the fishing industry, and taxi drivers.

What Is a Non-Exempt Employee?

Non-exempt employees are individuals working for qualifying employers who are guaranteed a minimum wage and overtime wages if they work more than 40 hours within a workweek and are not subject to one of the exemptions mentioned above. The FLSA applies to employers with total annual sales of $500,000 or more or engaged in interstate commerce. The FLSA requirements may also be triggered if the individual employee is covered based on the employee’s duties and role in interstate commerce. Employees across many industries qualify for a non-exempt status, such as many roles in healthcare, manufacturing, public service, media, and personal care and service occupations.

Common Ways Non-Exempt Employees are Misclassified

Misclassification of non-exempt employees often occurs in several ways. One of the most common is for an employer to designate a worker as an independent contractor when they are, in fact, an employee. The IRS has a 20-question test that they have developed that helps employers classify employees appropriately, but not all employers use them, or they just choose misclassification of employees on purpose.

Another common way that misclassification of non-exempt employees can occur is a misunderstanding of the law and who qualifies as exempt. Not all individuals who are salaried are considered exempt. In fact, employees who are paid on a salary basis are not exempt unless they also meet the duties tests. Additionally, generally, salaried employees must be paid at least $684.00 per week. The work performed should include a high level of duties, such as managing business operations or employees. Employers will also misclassify for financial purposes so they can save money by not paying overtime.

The Penalties for Misclassification of Non-exempt Employees

The penalties for misclassification of non-exempt employees can be severe. It can have tremendous financial consequences for businesses. They can face individual lawsuits, class-action lawsuits, audits by the IRS — and pay owed overtime, back wages, lost benefits, interest, and other damages.

Additionally, if an employee was incorrectly classified as an independent contractor and was hurt at work, they may be able to file a negligence claim since they would not have access to workers’ compensation benefits.

Can I Sue My Employer For Misclassification?

If an employer classifies you as exempt and you are legally considered non-exempt, you can sue your employer for misclassification to recover earned overtime, back wages, and lost benefits. If you have been working for the company for an extended period, those funds can add up to a very significant amount. Anyone misclassified as exempt may be entitled to unpaid overtime compensation during the previous three years if the violation was willful.

You may also qualify for a class-action lawsuit if the employer has commonly practiced the misclassification of non-exempt employees in your organization. This egregious practice can occur across industries, and employers should be held accountable to the fullest extent of the law.

If you are legally an independent contractor (and classified correctly by your employer), you are typically not able to sue an employer for overtime or minimum wage. If there are other parameters in your contract with them that they violate, you may have a case.

How An Employment Law Attorney Can Help Your Case

An employment law attorney has expert knowledge of employee rights, including the parameters of the FLSA, that is necessary to hold employers accountable and obtain the best resolution of your case.

Powerful employers often deny culpability, bully, blame, or even harass employees when they request to receive the wages they deserve. An employment law attorney has the skills, experience, and confidence to stand up to employers who break the law. Misclassification of non-exempt employees can be financially devastating to an individual and their families, and each worker deserves to receive what they are rightfully owed.

When an employer has misclassified you due to error or on purpose for their financial benefit, your attorney can navigate the complexities of employment law and lead as a strong advocate for you with your employer and their legal team.

Wenzel Fenton Cabassa, P.A. fights for justice for employees who have been subject to misclassification. We are with you each step of the way to stand up to employers and receive the wages you rightfully deserve. You may also qualify for back wages, lost benefits, interest, and other damages.

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