Yes. Employers need not automatically designate all employees as exempt who clearly perform the primary duties of the job functions described under one of the exemptions. Employers who maintain strict control over requests for overtime work, for example, or who need to keep track of all employee hours for billing reasons, may find that payment on an hourly basis works best for them. In such cases, the workers will most likely be nonexempt by default, simply because they are paid on an hourly basis.

By definition, to be designated as an exempt executive, professional or administrative worker under the Fair Labor Standards Act (FLSA), an employee must be paid on a salary basis. As a rule, paying an employee on an hourly basis makes that worker automatically ineligible for exempt status under the executive, professional or administrative exemptions. However, the salary basis requirement does not apply to outside salespersons , teachers, practicing lawyers and doctors, medical interns and residents, computer professionals who are paid on an hourly basis at a rate not less than $27.63 per hour, and certain executive, administrative or professional employees in the motion picture industry.

Another way to think of this is by remembering that employees typically are presumed nonexempt until proven to be exempt. This simply means that all employees are covered by the FLSA’s minimum wage and overtime requirements until a company can prove they meet the special criteria for one of the exemptions.

The advantage of using the exemptions, of course, is the ability to avoid the cost of overtime pay for additional hours of work. However, if an employer cannot clearly show that a particular employee’s duties and pay qualify for exempt status, the employer should label that person as nonexempt.

Periodic self-audits of employees’ exempt status are a best practice. Auditors often give particularly close scrutiny to the classification of low-level supervisory employees and high-level clerical employees.

Please Note: This material is provided as general information and is not a substitute for legal or other professional advice. Contact the Knowledge Center for more information.

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