Are You Determining FLSA Status Correctly?
Regulations around wages can be complex and varied, but as an HR professional it’s your job to ensure that employees are being properly compensated. The truth is that 70-90 percent of employers get the Fair Labor Standards Act (FLSA) duties test wrong. There are several factors to consider when classifying employees as overtime exempt or non-exempt, such as role, wage, job duties, and office location. That's why it's important to know the rules of FLSA status and correctly classify employees. Here are three tips to help put you on the right track.
1. Understand the Exempt Employee Pay Threshold
Before digging into the far messier piece of overtime regulations (the duties test), you can first rule out certain non-exempt employees with the FLSA wages test. Employees below a certain salary threshold are always eligible for overtime pay regardless of rank or duties. However, those over the threshold can be considered eligible under specific circumstances as laid out by the duties test.
Since 2004, the threshold for FLSA exemption has been a minimum salary of $23,660 annually, or $455 weekly. Though there have been talks of increasing this threshold, it looks like the 2004 figure is here to stay. Employees who fall above this threshold may still be eligible for overtime—that’s where the duties test comes into play.
2. Check Roles Against the Duties Test
Unlike the salary threshold, which offers a clear divide, the FLSA duties test depends on a number of factors specific to job duties and rank. Employees salaried above $23,660 may or may not be eligible for overtime pay depending on their job function.
To be in accordance with FLSA nonexempt rules, be aware of these seven DOL-enforced classes of workers who may be eligible for overtime exemption:
- Executive Employees
- Administrative Employees
- Learned Professionals
- Creative Professionals
- Computer Employees
- Outside Sales Employees
- Highly Compensated Employees
Under these classifications, the FLSA duties test looks even closer at the individual’s job responsibilities and role within the larger company. To remain compliant, make sure to understand the specific set of guidelines for each classification.
3. Stay Current With State-Specific Regulations
Once you master the FLSA duties test, there are still traps to watch out for. Though the FLSA requirements set an overall standard for companies, many states also have their own specific regulations around overtime. Nineteen states have state-specific overtime rules that address specific aspects of the already intricate duties test. California labor laws, for example, are even stricter about who qualifies as overtime exempt—both as it pertains to the wages test and the duties test.
Make sure you are aware of state-specific overtime rules, especially if you have offices in multiple locations. Once you have a thorough understanding of the duties test, you can tailor your internal processes to comply with local overtime regulations.
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