HR Badge #05: Employee Classification: Exempt vs. Nonexempt-HR Badge #5

HR Badge #5 - PowerPoint

Pdf Summary

This training explains how to classify employees as <strong>exempt</strong> or <strong>nonexempt</strong> under the Washington State Minimum Wage Act (MWA). <strong>Nonexempt</strong> employees are covered by the MWA and are entitled to protections such as <strong>minimum wage, overtime pay, and paid sick leave</strong>. <strong>Exempt</strong> employees are excluded from the MWA’s definition of “employee,” most commonly because they work in a <strong>bona fide executive, administrative, or professional capacity</strong>, meaning overtime rules generally do not apply to them.

To determine exemption status, employers primarily evaluate: (1) the employee’s <strong>primary duty</strong> (the most important duty, assessed based on the job as a whole), (2) whether the employee is paid on a <strong>salary basis</strong>, and (3) whether the salary meets the applicable <strong>salary threshold</strong> (noting thresholds vary by employer size and change annually; the 2024 threshold is <strong>$67,724.80</strong>). Exemptions are <strong>narrowly construed in favor of employees</strong>, and misclassification can result in agency complaints, lawsuits, back wages, double damages, and attorney’s fees.

The document outlines major exemptions. The <strong>executive exemption</strong> applies to employees whose primary duty is managing an organization or department, who regularly direct at least two full-time employees, and who have meaningful input into hiring/firing decisions, while meeting the salary threshold (e.g., superintendents, directors, principals). The <strong>administrative exemption</strong> covers office/nonmanual work related to business operations and requiring discretion and independent judgment on significant matters (e.g., HR directors, business managers). <strong>Academic administrators</strong> must perform administrative functions tied to instruction and be paid at least the district’s entry teacher salary.

Professional exemptions include <strong>learned professionals</strong> (advanced specialized education; e.g., psychologists, SLPs), <strong>teachers</strong> (primary duty is teaching; salary basis required but not the standard threshold), and <strong>computer professionals</strong> (specified computer roles paid by salary or qualifying hourly rate of at least 3.5x minimum wage).

Finally, <strong>coaches</strong> are treated as exempt or nonexempt based on their primary district job. Some nonexempt employees may coach as <strong>volunteers</strong> if services are freely offered, not the same as their paid work, and any stipend is only a <strong>nominal fee</strong> evaluated under “economic realities.”

Keywords

Washington State Minimum Wage Act (MWA)

exempt vs nonexempt classification

minimum wage and overtime compliance

paid sick leave requirements

salary basis test

salary threshold 2024 $67,724.80

executive exemption criteria

administrative exemption discretion and independent judgment

professional exemptions (learned professional, teacher, computer professional)

employee misclassification penalties (back wages, double damages, attorney fees)