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Exempt Versus Non-Exempt Employees

Whether you are an employer or an employee in New York, it is important to understand the distinction between exempt and non-exempt employees. For employers, treating non-exempt employees as exempt could end up costing thousands of dollars in back pay, liquidated damages, and legal fees. For employees, the distinction between the two impacts your rights under federal and state minimum wage and overtime laws. Non-exempt employees generally must be paid at least the minimum wage for each hour of work and one-and-one-half times their regular rate of pay for each hour in excess of 40 per week. However, as explained below, some employees are exempt from the minimum wage requirement, overtime wage requirement, or both.

How Does Federal Law Define an Exempt Employee?

The federal Fair Labor Standards Act (FLSA) requires that most employees receive at least minimum wage and at least one and a half times the rate of regular pay for any overtime hours worked (hours beyond 40). Under Section 13(a)(1) of the FLSA, however, the following types of employees are exempt:

● Executives;

● Administrative employees;

● Professional employees;

● Outside sales employees; and

● Computer employees.

There is also a salary basis test. The exemptions listed above apply only to an employee who:

● Is compensated on a salary or fee basis; and

● Earns a rate of at least $455 per week.

The question of whether an employee is exempt is extremely fact-specific and is often contested in litigation.

New York Distinctions and the Salary Threshold Increase

Generally speaking, federal law establishes the minimum requirements for wages, but states can provide additional protections. Employees in New York are subject to both the FLSA and the New York State Minimum Wage Act. The state law requires the payment of minimum wage and overtime wages to many employees who are exempt under the federal law.

As the New York State Department of Labor (NYSDOL) explains, some occupations are exempt under the FLSA but still are entitled to overtime pay under New York state law. The primary distinction between federal and New York state law, however, is the salary threshold for exemption. In order for executive and administrative employees to be exempt under state law, they must earn a higher amount per week than the minimum set by federal law. As of December 31, 2017, the salary threshold in New York, which varies by the location and size of the employer, is as follows:

● Employers of 11 or more employees in NYC: $975 per week;

● Employers of 10 or fewer employees in NYC: $900 per week;

● Employers located in Nassau County, Suffolk County, or Westchester County: $825 per week; and

● Employers located outside of NYC and the counties listed above: $780 per week.

To learn more about specific exemption tests, you should speak with a New York employment law attorney.

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Raff & Becker, LLP

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Phone: 212-577-9239
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