One of the most important (and misunderstood) U.S. compliance decisions in HR is determining whether a job is exempt or nonexempt under the Fair Labor Standards Act (FLSA).
Why does it matter? Because getting it wrong can lead to lawsuits, back pay, penalties, and employee mistrust. Getting it right supports compliance, equity, and transparency.
So how do you figure it out? Start with the federal FLSA three-part test:
· Part 1 - Salary Level Test – Does the employee earn at least $684/week?
· Part 2 - Salary Basis Test – Is the person paid a set salary, not hourly or based on output?
· Part 3 - Duties Test – Do the employee’s actual job responsibilities meet the criteria for exemption?
Common federal exemption types include:
Executive – Manages people as a primary duty and has authority over hiring/firing.
Administrative – Performs office work tied to business operations and uses independent judgment.
Professional – Requires advanced knowledge typically gained through higher education.
Computer – Limited to specific IT roles, not all tech jobs.
Outside Sales – Works primarily outside the office making sales or contracts.
Remember that job titles do not matter but job duties do.
But here’s where it gets more complex: States can have their own exemption rules, and in some places, they’re stricter than federal law.
· California, for example, requires a higher salary threshold and a more rigorous duties test.
· New York and Washington also have higher salary thresholds and additional rules.
· Some states have no additional rules, so the federal test applies.
Important: Employers must follow the rule that most favors the employee. If federal law says exempt but state law says nonexempt, the job is nonexempt.
That means HR and managers must understand both sets of rules. Train your teams to:
Review actual duties, not just job descriptions
Watch for hybrid roles and changes over time
Consult legal or comp experts when it’s unclear
FLSA classification isn’t just a box to check. It’s risk, compliance, and trust issue. Doing it wrong can cost an employer a lot of money and damage their reputation.
#FLSA #HRCompliance #ExemptVsNonexempt #JobClassification #WageAndHour #EmploymentLaw #StateVsFederal #Compensation #Training #HR #HumanResources #PayEquity #rewards #paytransparency #compensationconsultant