Exempt vs. Non-Exempt
In accordance with the Fair Labor Standards Act of 1938 and its regulations, employees are either exempt or non-exempt (also spelled as nonexempt).
The Fair Labor Standards Act (FLSA) is a wage and hour law that serves as the "main pay law" so to speak, because it governs the minimum wage, overtime pay and equal pay at the Federal level. (It also governs child labor.) Most jobs are governed by the FLSA, which is enforced by the U.S. Department of Labor.
Difference between Exempt and Non-Exempt
In short, the difference between exempt and non-exempt under the FLSA is that exempt employees are not eligible for the minimum wage or overtime pay, while non-exempt employees are eligible.
When employees question their status as exempt or non-exempt, it's usually exempt employees who question most, particularly when their employers routinely require them to work mandatory overtime without extra pay.
Generally speaking, salaried "white-collar" employees are exempt and hourly "blue-collar" employees are non-exempt; but, there's more to it.
How Employees are Classified as Exempt or Non-Exempt
Job titles don't matter as to whether employees are classified as exempt or non-exempt under the FLSA; rather it depends on the amount employees are paid, how they are paid and what their job duties are.
For employers to legitimately classify employees as exempt or what's commonly referred to as salaried exempt, the employees must earn at least $455 per week ($23,660 per year), receive their pay as a salary and also perform exempt job duties. Employees who earn less than $455 per week generally are non-exempt. Exceptions apply in both cases, but few.
Non-management employees who earn their pay by the hour generally are non-exempt too, even if they earn $455 or more per week. Such employees are commonly referred to as hourly non-exempt.
Update: The U.S. Department of Labor (DOL) increased the salary threshold from $455 to $913 per week ($47,476 per year). The new rule takes effect on 12/1/2016. It is expected to extend overtime protections to 4.2 million more workers who were not previously eligible.
What are considered to be exempt job duties under the FLSA customarily require discretion and independent judgment in regard to significant matters, whereas non-exempt job duties do not. Those who typically perform exempt job duties are white-collar employees who work in bona fide executive, administrative, professional and certain outside-sales positions.
One of the exceptions indicated above applies to employees who work certain information-technology (computer-related) jobs. If they earn their pay as a salary of at least $455 per week or by the hour at a rate of at least $27.63, then their employers may classify them as exempt. Such employees are commonly referred to as salaried exempt or hourly exempt, depending on how they earn their pay.
Some employees are commonly referred to as salaried non-exempt, because they are eligible for overtime pay even though they earn a salary. Some other employees are automatically exempt from FLSA coverage because other Federal labor laws cover them; for example, certain employees of motor carriers are exempt from FLSA overtime provisions, because they fall under the authority of the Motor Carrier Act of 1935.
Whether or not an employer has misclassified a non-exempt employee as exempt (or vice versa) is determined on a case-by-case basis. If you reasonably believe that your employer has misclassified you either intentionally or in ignorance of the law, then you (or your lawyer) may file a complaint by contacting the nearest district office of the U.S. Department of Labor, Wage and Hour Division (WHD).
If the WHD fails to rectify your exempt vs. non-exempt situation, then you may file a lawsuit against your employer in Federal court. Don't delay for long in filing a complaint or lawsuit, as a statue of limitations applies. Consult a lawyer for legal advice.
Your employer is prohibited from retaliating against you for consulting a lawyer about your FLSA employee rights, or for filing a complaint or lawsuit under the FLSA.
This is just a summary. For more information about exempt vs. non-exempt and related matters governed by the FLSA, browse the Fair Labor Standards Act Advisor and Fair Pay at the U.S. Department of Labor. To research an FLSA-equivalent law in your work state, if such a law exists, contact the relevant state labor department or browse its Web site (look for "wage and hour" or related topics).