Benefits and Compensation

Exempt Vs. Non-Exempt: What are the Rules? (Q&A Part 2 of 2)

In a recent BLR webinar, Austin E. Smith lent his expertise to tell us about some of the challenges employers face when dealing with exempt vs. non-exempt employee classifications.

For example, to meet the requirements for an administrative exemption, an employee must pass the “primary duty” test, which says that their primary duties must include the “exercise of discretion and independent judgment” with respect to “matters of significance.” But what classifies as “matters of significance”?

Also, do employees engaged primarily in fundraising activities qualify under the salesperson exemption since the duties overlap significantly?

These questions on meeting specific exemption requirements are the tip of the iceberg. Smith answered these, as well as questions on pay deductions for exempt employees and more. Check out his answers below and be sure to read Part 1 of this series of questions and answers on exempt vs. non-exempt issues.

Specific Exemption Details

Q. In marketing, what would be considered “matters of significance” as it relates to classifying employees as exempt under the administrative exemption?

A.These situations are very fact-intensive when reviewing specific positions. It could even depend upon the company structure and who is making decisions above that employee. In marketing, some examples might include: making decisions about which market segments the company will focus on, determining where the marketing budget will be spent (i.e. social media, specific geographies, etc.), market segments or leads to pursue, etc.—these are all examples of what might be classified as matters of significance.

Some examples that probably wouldn’t qualify are: creating specific ad details or promotional events (which don’t require a lot of discretion). If you made the decision to do a promotional event, that’s different from being directed to do so.

Q. If there’s an individual on staff who works from a remote location, who has a primary duty of fundraising, would he or she be exempt in the same category of outside sales employees?

A.Possibly. I’ve dealt with non-profit organizations who raise funds. The answer could be yes, as long as all of the various conditions are met. If the primary duty is “sales” (and fundraising could fall into a sales category, depending on the organization) and going out to solicit business, working away from the principle business, it could qualify. Further questions should be asked, such as: is the employee generating his or her own leads? Is the employee determining where to spend time? Or is it largely telemarketing? That may not qualify as directly.

Deductions from Pay for Exempt Employees

Q. In relation to the inability to deduct pay from exempt employees for partial days missed, what constitutes a partial day or half day? 4 hours?

A.A partial day would be any subdivision of a full workday, and depends on what a full workday is in your business. Typically, we do talk about 4 hours because that’s a half day when the standard workday is 8 hours.

Other Exempt Vs. Non-Exempt Considerations

Q. What are some typical salaried yet non-exempt jobs?

A.They could be almost anything. Almost any employee could get a salary yet not meet the other requirements to be exempt and thus still get overtime. Examples include clerical, front-office staff; bookkeepers; administrative assistants; mail room or runners; retail or restaurant front-line supervisors. These people might all be paid a salary, but still use a time clock and still get paid overtime. In these cases, it is the employer’s choice to pay them a salary for their base pay.

Q. What would trigger the DOL to audit an organization and check for proper exempt vs. non-exempt classifications?

A.Great question. Sometimes we get lucky enough that the DOL tells us, but often they don’t—and they don’t have to. Triggers might include: a complaint by an employee, former employee, or competitor (this is rare), or some other external complaint; a random audit; or you could be audited as part of a sweep of all businesses of a particular type in a particular area. Typically, however, the DOL audit is the result of a complaint about a classification issue.

For more information on exempt vs. non-exempt issues, order the webinar recording of “Exempt vs. Nonexempt: How to Find and Fix Misclassification Mistakes.” To register for a future webinar, visit

Attorney Austin E. Smith is a shareholder at the Denver office of Ogletree Deakins. In addition to his litigation practice, which focuses on wage and hour, workplace safety, and traditional labor matters, Mr. Smith also focuses on helping employers avoid potential liabilities down the road.

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