The distinction between exempt and nonexempt employees, a familiar dichotomy indicating exemption from certain federal labor regulations, was created through the Fair Labor Standards Act (FLSA) of 1938. The act instituted many taken-for-granted characteristics of employment in the United States: the five-day workweek, the 40-hour workweek, and overtime pay. The written intent of the act was to guarantee a minimum wage, regulate working hours, establish a premium for overtime pay, and prohibit child labor. Because of prior legal battles regarding the constitutional limits of federal labor legislation, the FLSA was written to cover interstate commerce. Even so, challenges to the authority of the act continued into the 1940s, with a range of industries challenging the new law. The restriction to interstate commerce left ample opportunities for exempting labor in enterprises with predominantly intrastate sales; this and industry-specific exemptions from the law left a considerable number of workers uncovered. The categories of exempt and nonexempt workers are often associated with specific occupations, but they constitute only part of the detailed rules and amendments that have been used to establish coverage.
Historically, four general rationales have been used as the bases of sector and establishment exemptions. For seasonal or irregular work, it was argued that legislation meant for weekly year-round employment presented an undue burden. Second, due to the lack of economic resources (by virtue of economies of scale or the capacity to substitute capital for labor), some firms (those with sales below a set minimum) and sectors (services) were exempt from the provisions. Third, in some cases, exemptions were based on the characteristics of the workers. It was argued that minimum wages were not needed when the labor force was predominantly young, when the individual workers tended to have other primary employment, and when the earnings were not likely to be the primary household earnings, clearly implying age-based career stages and gender-based careers. Finally, in cases in which wage and hour conditions had already been established by collective bargaining between labor and management (for example, transportation in the late 1930s), coverage by the FLSA was seen as unnecessary.
A lack of need also formed part of the rationale for exempting outside sales, administrative, professional, and executive employees. These occupations are not typically vulnerable to low wages. Furthermore, workers in these occupations tend to have good benefits and opportunities for advancement, which are seen as compensating for longer-than-standard workweeks. Even so, to classify as exempt, these workers must make a minimum salary and be engaged in occupation-specific duties and tasks for most of their time at work, or they must be certified or licensed by the state in order to do their work (e.g., teachers).
The FLSA has been amended many times, not only for the purpose of updating values—such as salary limits and the minimum wage—but also to alter exemptions and coverage. Current debates regarding the act involve recent changes in the criteria used to exempt workers from overtime regulations.
- Eisenbrey, R. 2004. “Longer Hours, Less Pay: Labor Department’s New Rules Could Strip Overtime Protection from Millions of Workers.” Economic Policy Institute Briefing Paper #152. Washington, DC: Economic Policy Institute.
- S. Department of Labor. 1981. Report of the Minimum Wage Study Commission, Vol. 2. Washington DC: The Commission.