FLSA Status
Misclassifying employees under labor law can cost organizations millions in penalties, back wages, and lawsuits. FLSA Status determines whether an employee is eligible for overtime pay under the Fair Labor Standards Act. For HR leaders, correctly defining FLSA Status is critical to payroll compliance, workforce planning, and legal risk management.
TL;DR
- FLSA Status determines if an employee is exempt or non-exempt from overtime under the Fair Labor Standards Act.
- Exempt employees are not eligible for overtime; non-exempt employees are.
- Classification depends on salary level, salary basis, and job duties.
- Misclassification can result in legal penalties and back pay claims.
- HRMS systems help automate classification and payroll compliance.
What Is FLSA Status?
FLSA Status refers to an employee's classification under the Fair Labor Standards Act (FLSA), a U.S. federal law governing minimum wage, overtime pay, recordkeeping, and child labor standards.
In simple terms, FLSA Status determines:
- Whether an employee qualifies for overtime pay
- How wages must be calculated
- What records employers must maintain
There are two primary classifications:
- Exempt Employees -- Not entitled to overtime pay.
- Non-Exempt Employees -- Eligible for overtime pay (typically 1.5x regular rate for hours worked beyond 40 per week).
For HR and payroll teams, FLSA Status is foundational. An incorrect classification can trigger audits, wage claims, and reputational damage.
Why FLSA Status Matters for HR Leaders
1. Overtime Compliance & Payroll Accuracy
Non-exempt employees must receive overtime pay for hours worked beyond 40 per week. Failure to comply can result in significant financial penalties.
According to the U.S. Department of Labor, millions of dollars in back wages are recovered annually due to wage violations. Proper FLSA Status classification prevents such costly errors.
Payroll systems must be aligned with FLSA rules to ensure automatic and accurate overtime calculations.
2. Legal Risk Mitigation
Misclassification lawsuits are one of the most common employment law claims. If an employee is wrongly categorized as exempt, employers may owe:
- Back overtime wages
- Liquidated damages
- Legal fees
For CHROs and CEOs, this isn't just an HR issue, it's a financial and reputational risk.
3. Workforce Planning & Budget Forecasting
Exempt roles often require flexible hours without overtime compensation, while non-exempt roles increase payroll costs when overtime rises.
Understanding FLSA Status helps leadership forecast labor expenses accurately and manage headcount strategically.
Pro Tip: Review FLSA classifications annually, especially when job roles evolve or salary thresholds are updated by regulators.
How to Determine FLSA Status
To classify an employee correctly, HR must apply three tests:
1. Salary Level Test
The employee must earn at least the federally mandated salary threshold to qualify as exempt. This amount is subject to regulatory updates.
If an employee earns below the threshold, they are automatically non-exempt regardless of job duties.
2. Salary Basis Test
Exempt employees must receive a fixed salary that does not fluctuate based on hours worked. Reductions tied to work quantity may invalidate exempt status.
This ensures stability in compensation and compliance.
3. Duties Test
The most critical component is job duties. Exempt roles typically fall under specific categories:
- Executive Exemption -- Manages teams and has hiring/firing authority.
- Administrative Exemption -- Performs high-level office or non-manual work related to business operations.
- Professional Exemption -- Requires advanced knowledge in a specialized field (e.g., lawyers, engineers).
- Computer Employee Exemption -- Applies to certain IT and software professionals.
- Outside Sales Exemption -- Engages primarily in sales outside the employer's place of business.
If the employee fails any one of these tests, they must be classified as non-exempt.
Exempt vs. Non-Exempt: Key Differences
| Factor | Exempt | Non-Exempt |
|---|---|---|
| Overtime Pay | Not eligible | Eligible (1.5x rate) |
| Salary Structure | Fixed salary | Hourly or salary |
| Time Tracking | Limited requirement | Mandatory |
| Work Flexibility | Higher flexibility | Strict hour tracking |
| Legal Risk if Misclassified | High | Moderate |
For HR teams, clarity between these classifications ensures operational efficiency and compliance readiness.
Common FLSA Misclassification Mistakes
Relying on Job Titles Alone
A 'manager' title does not automatically qualify for exempt status. Duties not titles determine classification.
Ignoring State-Specific Laws
Some states impose stricter salary thresholds or overtime rules than federal law. HR must evaluate both federal and state regulations.
Not Updating Role Changes
As organizations scale, roles evolve. A previously exempt position may no longer meet exemption criteria.
How HRMS Platforms Simplify FLSA Compliance
Manual classification and overtime tracking increase compliance risks. Integrated HRMS platforms like Qandle help HR teams:
- Automate time and attendance tracking
- Configure overtime rules
- Align payroll with classification status
- Maintain compliance documentation
- Generate audit-ready reports
Centralized workforce data ensures FLSA Status aligns with real-time payroll processing.
Best Practices for Managing FLSA Status
- Conduct annual job classification audits.
- Document exemption justifications thoroughly.
- Train managers on overtime compliance.
- Integrate payroll and attendance systems.
- Monitor regulatory updates proactively.
A proactive compliance strategy reduces legal exposure and builds employee trust.
Simplify FLSA compliance and eliminate payroll errors. Use Qandle's integrated time, attendance.
FAQ's
1. What does FLSA Status mean?
FLSA Status determines whether an employee is exempt or non-exempt from overtime under the Fair Labor Standards Act.
2. Who qualifies as exempt under FLSA?
Employees meeting salary level, salary basis, and duties tests typically executive, administrative, or professional roles qualify as exempt.
3. Can a salaried employee be non-exempt?
Yes. Salary alone does not determine exemption. Duties and salary thresholds must also meet FLSA criteria.
4. What happens if an employee is misclassified?
Employers may owe back overtime pay, damages, and legal penalties.
5. How often should FLSA classifications be reviewed?
At least annually or whenever job responsibilities or compensation structures change.
6. Does FLSA apply to all businesses?
Most U.S. businesses engaged in interstate commerce are covered, though specific coverage rules may vary.
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