Employee wages and/or compensation equality issues are often times misunderstood within the workplace and can vary significantly depending on the employees' classification, duties, and other factors. From a legal prospective, an employee's classification is determined by specific federal labor law standards determined by the Department of Labor (DOL) and is not determined by the employer.

The federal Fair Labor Standards Act (FLSA) enacted in 1938 provided the most comprehensive wage standards and employee protection which established a federal minimum wage standard and created regulations for child labor. The Fair Labor Standards Act was amended in 1963 with the passage of the Equal Pay Act which prohibited wage disparities among individuals of the opposite sex who perform substantially equal work for the same employer.

The FLSA established the fulltime employment workweek standard at 40 hours, overtime compensation regulations, and employee classification called exempt or nonexempt. The difference between an exempt and nonexempt employee classification relates directly to the overtime compensation regulations within the Fair Labor Standards Act, which says a nonexempt employee is entitled to overtime hourly pay one-and-a-half (1.5) times their regular hourly wage when an employee works over a 40 hours in a work week. An exempt employee, as implied by the name is "exempt" from this provision of the federal Fair Labor Standards Act and is not entitled to overtime compensation for work performed beyond a standard 40 hour work week.

As previously stated, the employee classification is not determined by the employer, but rather a specific set of rules established by the Department of Labor which evaluates the type of work being performed and specific skill sets required to perform within the position. There are several broad categories which can be used to determine if a position is considered "exempt".