Employees can be broadly classified into two categories: employees who are non-exempt from the Fair Labor Standards Act (FLSA) and employees who are exempt from the FLSA. Non-exempt employees must be paid overtime if they work more than 40 hours per week, while exempt employees typically do not receive overtime pay.
The duties test describes a set of criteria that an employee must meet for them to be classed as FLSA exempt. If an employee does not meet the criteria of the duties test they must be classed as FLSA non-exempt.
Why is the Duties Test Important?
Employers and HR managers must understand the FLSA duties test so that employees are properly classified as exempt or non-exempt from the FLSA. Any employee can be defined as non-exempt, but employees must pass the duties test to be exempt.
Misclassification can result in steep penalties from the US Department of Labor, even if the error was accidental. The Department of Labor may also publicly shame companies that misclassify employees, which could make it harder for them to hire talented employees in the future.
Incorrectly classifying employees as exempt or non-exempt can also lead to poor workplace morale. If employees feel that they aren’t being compensated fairly for their work because they are misclassified as exempt from the FLSA, they are more likely to quit.
What Duties Qualify for FLSA Exemption?
The FLSA duties test includes six categories of employees who may be exempt from FLSA requirements.
To qualify for the executive employee exemption, employees must meet several requirements.
- Their primary job duty must be to manage the business or a recognized department or subdivision of the overall business.
- They must regularly oversee the work of a minimum of two full-time employees.
- They must have authority to hire and fire employees under their supervision, or play a significant role in decisions to hire, fire, and promote employees.
There are two types of professional employees who qualify for exemption from the FLSA: learned professional employees and creative professional employees.
To qualify as a learned professional employee, employees must perform a job that requires advanced expertise and regular use of judgment. The advanced knowledge an employee has must be acquired through specialized education such as college, a certificate program, or prior work experience.
Examples of learned professional employees include doctors, scientists, engineers, lawyers, accountants, and teachers.
To qualify as a creative professional employee, employees must be involved in tasks that require imagination, original thought, or talent. They also must be in a recognized creative field.
Examples of creative professional employees include graphic designers, photographers, and writers.
To qualify for the administrative employee exemption, employees must perform office or non-manual work directly related to business operations. Administrative employees must exercise independent judgment on matters that materially affect the business.
The computer employee exemption applies to software engineers, programmers, and analysts who design, create, and test software. This exemption does not apply to employees who set up or maintain computer hardware—such as IT specialists.
Outside sales employees
The outside sales employees exemption applies to employees whose duties require them to regularly perform their work outside of a company’s offices. Their primary duty must be to make sales to customers or to facilitate new contracts with customers.
Highly compensated employees
The highly compensated employees exemption applies to employees who make at least $107,432 per year. To qualify, the employee must perform the duties of an executive, professional, or administrative employee as described above.
Additional Requirements for FLSA Exemption
Passing the duties test is just one requirement for an employee to be deemed as FLSA exempt. They must also meet two salary-based requirements.
To qualify for FLSA exemption, employees must receive a guaranteed base pay each week. This means that an employee must be paid the same regardless of whether they work 30 hours or 50 hours in a week.
Most salaried employees meet this requirement. However, most hourly employees don’t and must be classified as FLSA non-exempt.
Except for outside sales employees, employees must receive a base pay of at least $684 per week or $35,568 per year to qualify as FLSA exempt. Outside sales employees may receive a lower amount in base pay if they are paid commissions for their sales.
How to Comply with the Duties Test
There are a few steps employers can take to make sure that they’re complying with the FLSA duties test.
First, it’s important to read the guidance for employers offered by the US Department of Labor. This guidance changes periodically to clarify what duties are covered by each exemption category.
Employers should also think carefully about the duties involved in a job. Simply matching the job title to an exemption category is not enough. Just because a job title has the word ‘manager’ in it does not necessarily mean that the employee will qualify for the executive exemption.
It’s also important to audit your company’s jobs regularly. If the duties involved in a job have changed since the job was first created, the exemption status of that job may also need to change.
When in doubt, consult an employment attorney or HR specialist. Having documentation of the rationale for why an employee was classified as FLSA exempt is important in the event of a Department of Labor audit.
The duties test describes a set of job duties that may qualify an employee for exemption from the FLSA. Employees who pass the duties test and accompanying salary basis and salary level requirements do not need to be paid overtime.
Employers need to be cautious when applying the duties test because penalties for misclassifying employees under the FLSA can be severe. When in doubt, employers should seek help from an employment attorney.