Employees are classified as either exempt or non-exempt depending on their salary and the type of work or duties they perform. The Fair Labor Standards Act (FLSA) requires that non-exempt employees must receive at least the federally mandated minimum wage pay per hour worked within a work week. When non-exempt employees work more than 40 hours within a fixed, seven-day period, those employees must be paid 1.5 times their regular rate of pay for every hour beyond 40.
Exempt employees are ineligible for overtime pay for hours worked over 40 in a workweek (a workweek is a fixed seven consecutive calendar days). Exempt employees are expected to work as much time as is needed to fulfill their responsibilities without an expectation of overtime or additional pay. As a result, exempt employees are paid on a salaried, not hourly, basis. In addition, in most cases (as discussed below), employees must earn above a specific annual salary threshold and perform certain types of duties, (as defined in the FLSA regulations) to be classified as exempt.