Exempt Vs. Non-Exempt Employees: How to Avoid the Sinkhole of FLSA Lawsuits

Get educated on how exempt employees differ from non-exempt employees. Knowing the difference could save your business from a costly FLSA lawsuit.

In a previous article, you learned the differences between employees and independent contractors. Once a worker is determined to be an employee, the next step is determining whether they are exempt or non-exempt from FLSA minimum wage and overtime pay requirements. The Fair Labor Standards Act requires employers to pay non-exempt employees for overtime hours at a rate of one and a half times their regular pay, with “overtime” defined as more than 40 hours worked in a work week.

Properly classifying employees as exempt or non-exempt is the cornerstone of complying with the FLSA. Misclassification is a common ground for lawsuits against employers. Fines, penalties and back pay for FLSA violations can add up to an enormous, even crippling, sum that may far surpass the cost of paying overtime. Further, back pay owed to employees who were misclassified can be doubled as a means of bolstering compliance with the law.

Know the difference

With few exceptions, an exempt employee must

  • be paid at least $23,600 per year ($455 per week);
  • be paid on a salary basis; and
  • perform exempt job duties.

Most employees must meet all three “tests” to be exempt. Exempt job duties include: executive, administrative, learned professional, creative professional, computer science and outside sales.

In addition, highly compensated employees performing office or non-manual tasks, paid in excess of $100,000, are exempt if they customarily perform one of the mentioned duties.

Implement your knowledge

Once you have developed a thorough understanding of the differences between exempt and non-exempt employees, follow these steps to protect your company from FLSA exposure:

  1. Conduct an extensive self-audit to ensure that all employees are properly classified by using the tests mentioned above.
  2. Train managers on wage and hour regulations, and explain how errors negatively affect the company. Remind them that wage and hour compliance is part of their duties.
  3. Educate your staff about company rules regarding overtime, proper time clock usage, meal and rest periods, and all other wage and hour related items.
  4. Determine repercussions for employees who break company rules in this area, and educate the staff on them.
  5. Take all wage and hour complaints seriously, immediately correcting any errors.
  6. Be careful when new positions are added, especially if they are added because of mergers or acquisitions. If the previous company misclassified its employees, you might be responsible even though the merged or acquired entity may no longer legally exist.

Ohio law

Under Ohio law, employers grossing more than $150,000 per year are required to pay overtime to non-exempt employees at a rate of one and a half times the employee’s wage rate for any hours worked over 40 within one work week.

Employers grossing less than $150,000 are not required to pay overtime for hours worked beyond 40.

In most circumstances, the employer should follow the rule that is most advantageous to the employees when federal and state laws differ. For instance, the current federal minimum wage is $7.25 per hour, but the current minimum wage in Ohio is $8.10 per hour. This means Ohio employers must use the state minimum wage of $8.10, as this is most advantageous to employees. Thus, the minimum overtime rate in Ohio is $12.15 per hour. However, if the employer grosses less than $297,000, it may use the federal minimum wage as a basis for paying overtime.


Determining an employee’s exemption status isn’t always simple. It pays to know the rules ahead of time because the wrong classification can trigger a painful inquiry from the IRS and the Ohio Department of Labor, as well as other fines and penalties. Following these tips will help you to stay ahead of the game and ensure that your employees are properly classified—saving your business a huge chunk of change!


This article is made available for educational purposes only, as well as to give you general information and a general understanding of the law, not to provide specific legal advice. By using this information, you understand that there is no attorney-client relationship between you and the author. In no event should any information contained here be used as a substitute for competent legal advice on your own individual situation from a licensed attorney in your state. For more information on this topic, contact Alex Gertsburg at 440-571-7775 or ag@gertsburglaw.com. Get more legal tips for your business on The Gertsburg Law Firm blog, with new articles every week.

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  • Next up: Extend Your Health Insurance with Medical Mutual
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  • Extend Your Health Insurance with Medical Mutual

    If you have employees transitioning to individual insurance from an employer-sponsored health plan, the best thing you can do to ensure a smooth transition is help them make informed decisions about their coverage.

    If you have employees transitioning to individual insurance from an employer-sponsored health plan, the best thing you can do to ensure a smooth transition is help them make informed decisions about their coverage. When your employees have to shop for health insurance on their own, it’s important for them to have your guidance and know about affordable options to help secure coverage for them and their families.

    ACA plans provide comprehensive coverage that is more affordable than you think

    When individuals switch to an individual ACA plan from an employer-sponsored plan, they have to start over with the deductible and out-of-pocket maximum for the year. Medical Mutual allows previous members to carry over their annual deductible to a new individual plan, meaning your employees will minimize their out-of-pocket expenses*.

    While some employees may think they can’t afford an individual ACA plan, Medical Mutual will work with your employees to determine if they qualify for a subsidy to help them pay for monthly premiums.

    Short-term plans offer coverage for times of transition

    If your employees are concerned about unstable income and securing coverage for health emergencies, turning to short-term plans may be more affordable than applying for COBRA coverage. Short-term plans from Medical Mutual start as low as $67.77 a month (for a 30-year-old male employee) and were designed to help with transitional coverage while providing immunizations, labs and well child exams. These plans also offer easy access to telemedicine providers, so your employees can connect to their doctors from the comfort of their homes.

    Medical Mutual is here to help your employees through the transition

    Our licensed agents will provide concierge service to your employees. They will be there every step of the way, finding the best plan for your employees’ needs, guiding them through the transition to their new plan and helping them determine if they qualify for a subsidy to help pay for their new coverage.

    • Call Medical Mutual concierge service for members moving to individual plans at
      1-855-444-0168, Monday through Friday, 8 a.m. to 8 p.m., and Saturday, 12 p.m. to 6 p.m.
    • Visit MedMutual.com/IndividualPlans

    *This offer is valid for all employees who lost employer-sponsored coverage through Medical Mutual for 90 days from the day coverage was lost if they enroll in a Medical Mutual individual plan.

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  • Next up: Firearms in the Workplace: What You Need to Know
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  • Firearms in the Workplace: What You Need to Know

    With workplace violence and shootings on the rise, it’s crucial for business owners to outline firearm policies for their employees. In order to do so, employers must know the laws regarding employee possession of firearms. Read on as we unpack these laws and detail potential scenarios that could trigger this type of violence.

    Workplace violence and workplace shootings are a real concern for employers of all sizes. As a result, many employers are considering policies prohibiting their employees from possessing firearms during work time or on their premises. Policies such as these can help to protect employers from liabilities. Every employer should consider instituting these policies with a full understanding of the laws and the steps that need to be taken.

    The United States is a country that protects the rights of its citizens to bear arms. And with workplace shootings and workplace violence on the rise, people are exercising that right by purchasing and owning firearms. As a result, it is imperative that employers understand the laws and what their rights are when restricting firearms in the workplace.

    Know the law

    While employers are not generally liable for crimes committed by their employees, they could bear some liability for crimes committed by employees who have guns at work. This falls under negligent hiring, supervision or retention; worker’s compensation; or the Occupational Health and Safety Act (OSHA). What’s most important here is if the employer knows or should have known of an employee’s violent tendencies and that the employee possessed a firearm. Employers have a responsibility to provide a safe workplace. Every employer should have a thorough understanding of federal and state laws regarding firearms in the workplace and consulting with an attorney on these matters is highly recommended.

    Approximately half of all states, including Ohio, have statutes that require employers to allow employees to store firearms in their own personal vehicle. However, employers can restrict employees from storing weapons in company-owned vehicles. They can also restrict firearms from coming into their place of business, but they cannot prohibit firearms from being locked in a car in the parking lot.

    All workplaces, regardless of their size, should have a firearms policy in their employee handbook or company manual. While policies restricting an employee’s ability to possess a firearm at their place of employment or during work time can help to protect other employees and the employer from liability, employers should also be aware of state laws that protect an employee’s right to possess firearms.

    Currently, prohibiting employees from carrying a firearm on his or her person while working or from having guns in the employer’s workplace is permissible in every state. However, laws do vary from state to state, so prohibiting employees from having firearms in their personal vehicles—even in a company parking lot—and discriminating against gun owners in hiring or in regard to the terms and conditions of employment can result in liability in many states. As mentioned earlier, employers should seek advice from competent legal counsel when drafting their policies limiting employees’ ability to possess guns.

    Be aware of triggers

    In addition to instituting firearms policies, and since employees depend on their employer to provide a safe workplace within the confines of state and federal laws, all employers should be aware of potential situations or scenarios that might be of concern such as:

    • a disgruntled employee who was recently fired;
    • a co-worker with substance abuse issues and/or mental illness;
    • volatile events (i.e., strikes, protests); and
    • an employee having marital or custody issues

    These can be triggers for workplace violence and workplace shootings. Therefore, employers should always follow these three steps to provide a safe work environment:

    Step No. 1: Acknowledge employees’ concerns for safety.

    Step No. 2: Establish clear gun policies and procedures for the workplace.

    Step No. 3: Educate employees on safety measures in place for their protection.

    Employers who follow all the above steps can help to avert a potentially tragic situation. 

    Timothy A. Dimoff, CPP, president of SACS Consulting & Investigative Services, Inc., is a speaker, trainer and author and a leading authority in high-risk workplace and human resource security and crime issues. He is a Certified Protection Professional; a certified legal expert in corporate security procedures and training; a member of the Ohio and International Narcotic Associations; the Ohio and National Societies for Human Resource Managers; and the American Society for Industrial Security. He holds a B.S. in Sociology, with an emphasis in criminology, from Dennison University. Contact him at info@sacsconsulting.com.

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  • Next up: When You Can’t Fire Employees at Will
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  • When You Can’t Fire Employees at Will

    At-will employment does have limitations when it comes to terminating employees. Read on below for some things to keep in mind before you fire someone.

    Employment at will—the right to terminate a work relationship for any reason or no reason at all—is a state law concept structured to give both businesses and workers flexibility and mobility. For employers, employment at will obviously provides great latitude concerning staff management and it can help facilitate decisions related to seasonal and holiday workers, outsourcing, probationary periods, and policy effectiveness. Forty-nine states recognize employment at will as the default employment relationship (Montana being the exception).

    But employment at will is not an employer’s carte blanche and the doctrine does have its limitations. While an employer need not necessarily give a reason for terminating an employee at will, if a reason is given, it must be a permissible one. Even when no reason is given, the circumstances of the termination might imply an impermissible motive underlying the termination. Further still, the relationship between the employer and employee may evolve over time to imply something more than at-will status.

    Employers should always pause and assess the situation before opting for termination.

    Personal characteristics and immigration status

    Anti-discrimination laws, spearheaded by Title VII of the Civil Rights Act of 1964, prohibit workplace discrimination based on race, gender, national origin, or religion. Other state and federal laws have expanded anti-discrimination protections to age, sexual orientation, pregnant females, and new mothers.

    It is permissible to refuse employment or terminate an existing employee if their immigration status prohibits them from working; however, federal statutes like the Immigration Reform and Control Act (IRCA) prohibit hiring and firing decisions made based on legal alien status.

    Pretextual termination

    A perfectly legal basis for termination might later be perceived or characterized as pretextual for something more insidious, potentially making the circumstances surrounding a termination relevant to a wrongful termination lawsuit. Common examples of pretextual termination include releasing an employee before he or she qualifies for retirement benefits, or coercing an employee’s departure through uncomfortable or inhospitable work conditions in order to avoid paying severance.

    Not cooperating with company investigations

    Generally, employees might refuse to cooperate with a company investigation—a property search or drug test, for example. It is also generally alright for a company to respond to such refusal with a termination letter. But there are situations where non-cooperation is not proper grounds for terminating an employee at will. The federal Employee Polygraph Protection Act, for example, prevents termination for refusal to take a lie detector test.

     First Amendment rights

    While the First Amendment to the U.S. Constitution broadly protects freedom of speech, the Constitution generally regulates only government activities and its application to private employers is therefore limited. However, some types of speech, such as politically expressive speech, operate in a gray area. While several states have extended protection for political speech to private employees, Ohio is not among them.

    Other speech, such as discussions about workplace conditions and acts contrary to public policy, remain in the sphere of protection. Let’s delve into them.

    Politics affecting workplace conditions

    The National Labor Relations Act prohibits employers from banning discussions about workplace conditions, including how the political climate or the outcome of a particular election might impact the workplace. By logical extension, employers also cannot fire terminate employees for such discussions.

    Under the U.S. Supreme Court’s infamous decision in Citizens United v. FEC, 130 S. Ct. 876 (2010), which held that corporations have a right to make independent political expenditures under the First Amendment, employers can communicate directly to employees about elections, encourage them to vote for certain candidates, and, in many states, even compel them to do political work or attend political gatherings during work hours and for compensation.

    In a legislative parallel, the Civil Service Reform Act of 1978 prohibits discrimination (up to and including termination) of a public employee for his or her political affiliation. This protection has not found widespread purchase in the private sector. Ohio has no such employee protections, but it does require employers to allow for “reasonable” time off to vote at the polls. See R.C. 3599.06.  


    Employers cannot terminate employees simply for attempting to defend or assert their rights. For example, consider an employee who files a good faith lawsuit for workplace discrimination; the employer cannot terminate the employee out of hand just for bringing the lawsuit. A court could find that such a termination was retaliatory.

    Another point of retaliation might be an employee challenging the business on public policy grounds. Public policy is an amorphous talking point in the law, but in our context the heart of it is to encourage acts that the public would view as morally or ethically positive and discourage those which are not. An employee’s refusal to commit an illegal act, reporting an employer’s illegal act (i.e., whistleblowing), or exercising a legal right (e.g., voting) are all favored by public policy and may not be used as a basis for termination.

    Implied contracts

    Sometimes, an implied contract can arise from an employment at will relationship. Such an implied contract could arise from representations by the employer that suggest job security to the employee. Courts will often carve out or limit an employer’s otherwise blanket right to terminate based on these kinds of representations. In some states, even at-will policies in employee handbooks can be amended or nullified by an employer’s subsequent representations and assurances. See, e.g., Wilson v. General Motors Corp., 454 N.W. 2d 405 (Mich Ct. App. 1990).

    Most of the prohibitions on termination that we’ve discussed require the employer to take some conscious (often contentious) action. An implied contract, though, can form from the most innocuous of conversations. Hence, employers should be careful about representations made to employees in any circumstance.

    Max Julian is an attorney at The Gertsburg Law Firm. Julian’s practice is focused on commercial litigation. He can be reached at mj@gertsburglaw.com or by phone at (440) 571-7541.

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  • Next up: Firing With Compassion
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  • Firing With Compassion

    It is not a fun part of the job, but firing an employee is still part of every small business owner's responsibilities. Learn how to do it as compassionately and be as supportive as possible.


    What do you do if you have a team member who has not grown with your company or who is no longer a good fit? Or, you are facing the unfortunate situation of needing to downsize? Do you know you should let them go, but you haven’t yet because they rely on you to put food on the table, or to pay their mortgage? 

    That is a complicated and sensitive position to be in, but there are things you can do to let them go in a way that is compassionate and supportive.  

    To start, you must first look at what you are and are not, responsible for.  

    You are not responsible for someone else’s livelihood—they are. You are not responsible for how someone else interprets a situation, or how they feel—they are. And you are not responsible for anyone else’s financial situation—they are.  

    You are responsible however, for how you treat people, how you feel, how you react, and how you approach this delicate situation.  

    When we let someone go, it can be easy to get into self-talk that they will not find another job, that it will bring hardship unto them, that it will burn a bridge, or some other tragic result. These are simply not true nor are they your responsibility.  

    RELATED: 3 Things to Know About Hiring the Perfect Team for Your Business

    What these thoughts and worries do indicate is that you are a caring and thoughtful human.  That you have invested time and energy into this team member, and even though it might be time to go your separate ways, you wish them success and happiness.  

    So, what are some ways to separate with care, integrity, and kindness? And, if the financial burden is a real concern how can you mitigate this as much as possible? 

    Reflect on what has gone well and focus on this at the beginning of the conversation.  Let them know with sincerity, what you have appreciated about them. Even if there is not much (and we all know this can happen), there is always something positive.  

    Be honest about why you are choosing to let them go. This can be hard, we worry about other’s feelings, but doing this in a kind way is possible. But being dishonest and trying to cover up the real reason is lying. They will see right through it, which will leave the relationship on a negative note, which is unnecessary. And, as Kim Scott mentions in Radical Candor, this does no one any favors—be honest, but kind. 

    Have empathy. This news can be devastating for some—express empathy but avoid too much emotional reaction. By being empathic, but firm, you allow a space for them to find their own strength and power. When we unnecessarily emote with them it emphasizes the tragedy and creates a space for victimhood to step in.  

    Thank them sincerely for their service and then move on.  

    RELATED: Read more by Erin Longmoon

    As far as the money question is concerned, there are ways to help lessen the burden while they look for another job, here are a few to consider:

    Offer a severance, if you can afford it, to help tide them over until they find a new job.  It takes time to find a job, and then there is always the wait for the first paycheck. So, if you can muster a full month’s pay, this is a generous gesture. But even one week is better than none and will show that this matters to you. Do not apologize if you cannot give as much as you wish you could. 

    Consider giving a few weeks’ notice. This is often overlooked by employers because they worry the employee will sabotage them or steal from them. First off, this is such a horrible way to feel about an employee. And if you truly have someone like this on your team, then negate much of what I am saying here and ask them to leave, now. But most people are good. And if you handle this correctly, it can be a very kind way to bridge the time until they find a new position. We often ask, and even expect our employees to give us notice, why then do we not show them the same respect? 

    Help them find another job. If this is an employee who is just not the right fit for your needs or culture, but could be terrific for another, help spread the word to your network that they are available, endorse them for their strengths, and be a positive reference. And remember, when we hire the wrong fit, it can make someone seem like a bad hire, even someone you do not like. But this is primarily because you made an incorrect choice, not that they are a bad person. So just because they did not work out for you, does not mean they will not work well for someone else.  

    Letting someone go can be very hard—in fact it can be just as devastating for you as it can be for them. But you are resilient, they are resilient, you both will be okay. And holding onto someone who should go is not fair to you and is especially not fair to them. You both deserve to work in places that make you happy and joyful. And trust me, if one of you is not, the other is not.  

    Erin Longmoon is the CEO of Zephyr Recruiting, which she founded in response to her clients’ needs for help in with building effective and successful teams. Zephyr Recruiting serves the small business community—the mom and pop places that are the backbones of our communities and our economy.

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  • Next up: Five Tips for Maintaining a Healthy Diet
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  • Five Tips for Maintaining a Healthy Diet

    Research shows that following a healthy diet is important for both your overall physical and mental health1. Plus, maintaining a healthy diet can help fight against chronic diseases like diabetes and cancer. To get started, we put together five useful tips that will help you keep and maintain a healthy diet.

    1. Track your progress through nutrition and healthy lifestyle apps – Many people have turned to healthy eating apps to better track and manage their diet. These types of apps allow you to create personalized health goals, track the meals you’ve eaten, search the calorie amount of foods, share healthy recipes and more. Most apps can be installed right on your phone for easy use. 

    Most dieting apps require your daily calorie intake amount. If you don’t know yours, you can find out using the MyPlate Plan from the USDA. To see a list of 10 of the best weight loss and healthy eating apps, click here.

    2. Choose whole foods over processed foods – Whole foods are foods that are in their natural state with little to no processing. Common examples of whole foods include fruits, vegetables and whole grains. Whole foods are a great source of vitamins and minerals, and typically don’t have any unhealthy fats in them. Processed foods have added ingredients and are typically frozen or canned. However, there are some healthy processed food options like canned tuna and yogurt. 

    Looking at the nutritional label can help you determine how processed a food is and if it’s a healthy option. Product ingredients are listed from highest to lowest, meaning that the first ingredient is what the manufacturer used the most of. If the first ingredient includes refined grains or sugar, you can assume that the food is unhealthy.

    3. Try the 80/20 dieting method – The 80/20 rule might be good for you if you don’t want to follow a super strict diet or count every single calorie you eat. The rule is simple – Eat nutritious and clean foods 80% of the time and allow yourself to indulge in unhealthy options the other 20%. If you are having a craving for more unhealthy foods, try eating the food in a smaller portion while drinking a glass of water with it. The water will fill you up, while helping to satisfy your food craving. To learn more about the 80/20 dieting method, click here.

    4. Drink water in place of other beverages – Getting enough water can help maximize your physical performance, increase your energy levels and help curb your appetite. Drinking water is a great way to cut back on unhealthy beverages that are high in sugar like soda and energy drinks. If a plain glass of water doesn’t do it for you, add a slice of lemon or lime to give it some natural flavor.

    An easy way to make sure you get enough water is by using the 8x8 rule. This rule means you should drink eight 8-ounce glasses of water each day.

    5. Explore new recipes – You don’t need to eat the same foods to make your diet work. There are many healthy recipes you can find that are delicious and easy to make. Ask your friends and family if they have any recommendations or do an internet search for healthy recipes. You can also subscribe to a meal-kit service where they ship fresh and healthy ingredients for a recipe that you’ve chosen. To see a list of the eleven best meal-kit services, click here.

    For more information, please talk to your doctor. If you are a COSE MEWA member through Medical Mutual, use our provider search tool to get started. To learn more about the benefits offered through a COSE MEWA health plan, please contact your broker or your Medical Mutual Sales representative. 

    Source: Mental Health Foundation1

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