How is FLSA exempt status determined in the workplace?

In most U.S. workplaces, the Fair Labor Standards Act (FLSA) typically classifies employees as one of two categories: exempt or non-exempt. Why does this matter? Well, for starters, this classification will likely determine if an employee is eligible for overtime pay.

For example, in the case of employees with exempt status, they typically receive an annual salary that doesn't change based on the number of hours worked. More specifically, exempt employees do not receive overtime pay under the FLSA for any hours worked beyond the standard 40-hour workweek.

On the other hand, the FLSA entitles non-exempt employees, who are often paid on an hourly basis, to receive overtime pay if their work exceeds 40 hours in a week.

Job duties are central to determining FLSA exempt status

For occupations that are covered by the FLSA, there are extensive requirements for classifying employees as exempt or non-exempt — the first of which is an employee's actual job duties.

Indeed, in many cases, the job duties of an employee will be the determining factor for whether they qualify for exempt status or not. For example, here are some of the most common job categories that, because of their job duties, typically fall under exempt status:

• Executive-level employees – Duties for this category may include authority in hiring or firing other employees, as well as direction or management of the business.
• Administrative employees – This includes having autonomy to make decisions about important matters and non-manual work directly related to the business, its customer base, and its management teams.
• Learned professional employees – These exempt employees typically perform work that requires advanced knowledge in science or other fields in which employees need long-term specialized instruction or higher education.
• Computer professionals – Employees in this category have learned skills in computer and technology fields — like programming or software engineering — and apply this knowledge to computer and program systems, hardware, and machine operating systems.
• Outside sales employees – The duties for this category are primarily consist of being out in the field getting new sales, contracts, and orders for the business.

These duty requirements are clearly defined under federal law and they act as a “test" to help determine the exempt status of an employee.

It is also important to note that an employer cannot make an employee exempt by simply giving them a job title that typically applies to exempt workers. For example, just because an employer calls an employee an "executive" doesn't mean they are exempt and therefore not entitled to overtime pay. What matters is the employee's actual job duties — and, if the employer classifies an employee wrong, it can be a costly mistake down the road.

Earnings also play a role in exemption status

In addition to the job duties that help categorize workers as exempt, there are earnings and wage thresholds that may also come into play when determining exempt status. If the employee doesn't also meet these requirements in addition to the duty requirements listed above, they may not qualify for FLSA exempt status.

Some of these earning requirements may include:

• Weekly earnings of no less than $684.00
• Pay in the form of a salary
• Commissions, bonuses, fees, and incentives given annually, and fulfilling no more than 10% of the salary level

But the rules can differ from job to job, so it's crucial to stay up to date on the most current FLSA laws. Also, it's important to remember that some states have passed their own laws when it comes to overtime pay, so even if an employee isn't eligible for overtime pay under the FLSA, they may be entitled to it under state law.

A standard for the labor force

The FLSA's core function of creating clear pay guidelines for workers by granting them exempt status or classifying them as non-exempt has been a longtime standard for companies around the country. Today, it's likely difficult for many — employers and employees alike — to imagine the workplace without many of the FLSA's rules.

If you would like to stay current on all of the laws and regulations associated with the FLSA and overtime pay, start your free trial of Practical Law. Get expert guidance and up-to-date authority curated by a team of 300+ experienced attorneys.