Understanding Overtime Laws
Understanding Overtime Laws: Exempt vs. Non-Exempt Employees for Small Businesses
When it comes to employment law, one of the most common (and costly) mistakes business owners make is misclassifying employees when it comes to overtime. In this episode of the PEO Playbook, Chad Philly of Staff Brokers walks through the legal framework behind exempt vs. non-exempt employees and how you can protect your business from wage violations.
What Does "Exempt" Mean?
An exempt employee is someone who is not legally required to be paid overtime. A non-exempt employee, by contrast, must be paid 1.5x their hourly rate for any time worked over 40 hours in a 7-day period.
The 5 Major Overtime Exemptions
To qualify as exempt, an employee must make at least $684 per week and meet specific criteria in one of the following categories:
Executive
Must manage two or more employees and have influence over hiring and firing decisions.Administrative
Often the grayest area requires making decisions of consequence and supervising staff.Professional
Applies to jobs requiring advanced degrees (e.g., lawyers, doctors, engineers not bookkeepers).Computer Programming
Highly skilled programmers making above a specific hourly threshold (approx. $27–$38/hour) may qualify.Outside Sales
Employees who spend 51%+ of their time in the field making sales. They must at least earn minimum wage weekly.
Why It Matters
Even if your employee agrees not to be paid overtime, if they’re non-exempt by law, your business could face serious legal repercussions. And often, you won’t hear about the issue until after they’ve left your company.
How a PEO Can Help
PEOs are well versed in staying compliant with evolving employment regulations. Partnering with one can protect you from classification mistakes and ensure policies like overtime tracking, pay period structure, and job descriptions align with the law.
Need help avoiding wage-and-hour headaches?
Visit PEOPlaybook.com/BookNow to get expert guidance.
