Let's be honest - wage and hour laws can feel like trying to read ancient hieroglyphics. I remember helping a friend's small business navigate FLSA classification last year, and we both nearly threw our laptops out the window. But getting exempt vs non-exempt wrong? That's a fast track to lawsuits or Department of Labor audits. This guide cuts through the legal jargon to give you practical, actionable clarity.
The FLSA Bare Bones Basics
The Fair Labor Standards Act (FLSA) is that 1938 law dictating minimum wage, overtime pay, and child labor standards. Its core purpose? Preventing worker exploitation. Funny how things from the Great Depression era still bite businesses today when misunderstood.
Who Falls Under FLSA Coverage?
Most US workers are covered, but notable exceptions exist:
- Independent contractors (though misclassification is epidemic – saw Uber lose $100M in California over this)
- Certain seasonal/recreational workers
- Specific transportation workers
- Some computer professionals earning $27.63+/hour
Coverage hinges on enterprise coverage (businesses doing $500k+ annually) or individual coverage (employees engaged in interstate commerce). That "interstate commerce" bit catches more people than you'd think – ever ship a package across state lines? Bingo.
Exempt vs Non-Exempt: The Core Differences
This FLSA exempt vs non-exempt distinction determines whether you must pay overtime. Mess this up, and back wages plus liquidated damages will bleed your budget dry.
| Factor | Exempt Employees | Non-Exempt Employees |
|---|---|---|
| Overtime Pay | Not entitled to OT pay regardless of hours | Must receive 1.5x regular rate for hours >40/week |
| Payment Method | Typically salaried (fixed weekly amount) | Often hourly, but can be salaried if OT eligible |
| Recordkeeping | No daily hour tracking required | Mandatory daily time tracking (DOL requirement) |
| Common Roles | Executives, administrators, professionals, outside sales | Clerical staff, technicians, laborers, most front-line workers |
| Minimum Salary | $684/week ($35,568 annually) under federal rules | No minimum salary threshold |
Salary alone doesn't guarantee exemption – that's where employers faceplant. Giving someone a $40k "manager" title while having them stock shelves? Hello misclassification lawsuit.
The Three-Legged Stool Test
Exemption requires passing all three FLSA tests. Fail one? They're non-exempt. Period.
| Test Type | Key Requirements | Common Pitfalls |
|---|---|---|
| Salary Basis | Fixed weekly salary not reduced for quality/quantity of work | Docking pay for partial-day absences |
| Salary Level | Minimum $684/week ($35,568/yr) federally (some states higher) | Ignoring state thresholds (e.g., CA: $66,560) |
| Duties | Primary duties match exemption categories (see below) | Overestimating "managerial" duties |
I audited a tech startup that assumed all devs were exempt. Their junior devs spent 90% time debugging code - not designing systems. $200k in back overtime payments later...
Dissecting the Duties Tests
This is where FLSA exempt vs non-exempt gets messy. Job titles mean nothing – actual daily duties rule.
Executive Exemption Duties
- Primary duty: Managing the enterprise or a recognized department
- Customarily directs ≥2 full-time employees
- Has hiring/firing authority (or recommendations carry weight)
Reality check: I've seen "managers" without authority over break schedules. That's not managing – it's babysitting with a title.
Administrative Exemption Duties
- Primary duty: Office/non-manual work directly related to management operations
- Exercise discretion and independent judgment on significant matters
Examples: HR specialists, compliance officers, marketing analysts. The receptionist handling preset scripts? Non-exempt.
Professional Exemption Duties
- Primary duty: Advanced knowledge in science/learning (e.g., doctors, lawyers, architects)
- Requires specialized education (typically a degree)
Note: Creative professionals (writers, musicians) have separate criteria.
Computer Employee Exemption
Applies to systems analysts, programmers, software engineers, etc. Must earn ≥$684/week or $27.63/hour. Duties include:
- Application/system design and development
- Complex computer systems analysis
- Solely hardware work? Non-exempt.
State vs Federal FLSA Rules
FLSA sets the floor – states can build higher walls. Ignore this at your peril.
| State | Salary Threshold | Overtime Rules | Notes |
|---|---|---|---|
| California | $66,560/year | Daily OT after 8 hours | Strictest classification tests |
| New York | $936/week NYC (2024) | OT after 40 hours | Varies by region/industry |
| Washington | 1.75x min wage (~$67k) | OT after 40 hours | Annual increases until 2028 |
| Texas | Follows federal ($35,568) | OT after 40 hours | No state-specific OT laws |
Practical Scenarios: Is This Worker Exempt?
Let's apply FLSA exempt vs non-exempt rules to real jobs:
Case Study: Retail Store "Manager"
- Salary: $800/week
- Duties: 70% stocking shelves, 25% running registers, 5% scheduling
- Decision: Non-exempt. Why? Primary duty isn't management.
Case Study: Marketing Coordinator
- Salary: $40,000/year
- Duties: Designs campaigns per supervisor's specs, tracks analytics data
- Decision: Non-exempt. Why? Lacks independent judgment on significant matters.
Case Study: Nurse Practitioner
- Salary: $110,000/year
- Duties: Diagnoses patients, prescribes meds, orders tests
- Decision: Exempt (Learned Professional exemption)
Costly Misclassification Consequences
Misclassifying non-exempt workers as exempt invites:
- Back wages: Up to 2 years (3 years if willful violation)
- Liquidated damages: Equal to back wages (double damages)
- DOL fines: Up to $2,074 per violation
- Attorney fees: Plaintiffs' lawyers get paid if they win
- Collective actions: One employee claim can become class-action
Remember that startup I mentioned? Their $200k settlement evaporated their runway. They folded 8 months later.
Action Plan: Classification Compliance
Use this FLSA exempt vs non-exempt workflow:
- Audit current roles: Scrutinize actual duties, not job descriptions
- Check salary levels: For federal AND your state
- Document everything: Duty logs, decision rationales
- Train managers: No docking exempt salaries for partial-day absences!
- Reclassify if needed: Yes, it hurts. Lawsuits hurt more.
FLSA Exempt vs Non-Exempt FAQs
Can non-exempt employees be salaried?
Absolutely. Salary doesn't equal exemption. You must still pay OT for weekly hours over 40.
Do exempt employees get overtime pay?
Generally no – but some states require OT for certain professions (e.g., CA physicians after 12 hrs/day). Always check local laws.
How often should we review classifications?
Annually, or when:
- Job duties materially change
- Employee gets promoted
- New state laws pass (they often do)
Are remote workers exempt?
Location doesn't determine status – duties/salary do. But tracking non-exempt remote hours? That's a compliance nightmare I've seen trip up even Fortune 500s.
Pro Tips from the Trenches
- Recordkeeping is armor: If sued, contemporaneous duty logs trump memory.
- Beware de facto managers: That "lead barista" making schedules? Likely non-exempt.
- Reclassifications sting less with transparency: Explain why roles shift – "compliance" beats "demotion".
- When in doubt, pay OT: Cheaper than DOL penalties.
The FLSA exempt vs non-exempt puzzle isn't simple, but mastering it prevents payroll disasters. Got a tricky classification? Get an employment attorney – that $500 consult beats $50k in back wages. Trust me.
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