FLSA Exemption Flow Chart

This article will provide you with a clear overview of what FLS exemptions entail, including the categories that qualify and the implications for both employers and employees. To facilitate your understanding, we have included a comprehensive flow chart that visually outlines the processes and criteria related to FLS exemptions. We encourage you to utilize this resource as you navigate through the complexities of labor laws and ensure that your organization remains compliant while effectively managing its workforce.

FLSA Exemption Flow Chart

1. Start

Does the employee earn at least $684 per week ($35,568 annually)?

Yes ➡️ Proceed to Step 2

No ➡️ Non-Exempt (Employee is entitled to overtime pay)

2. Salary Basis Test

Is the employee paid on a salary basis (i.e., not hourly and regardless of hours worked)?

Yes ➡️ Proceed to Step 3

No ➡️ Non-Exempt (Employee is entitled to overtime pay)

3. Job Duties Test

1. Executive
   • Primary duty is managing the enterprise or a department.
   • Directs the work of two or more full-time employees.
   • Has the authority to hire/fire or has significant influence in such decisions.
2. Yes ➡️ Exempt under Executive
3. No ➡️ Proceed to next category.
4. Administrative
   • Primary duty is performing office or non-manual work related to management or general business operations.
   • Exercises discretion and independent judgment in significant matters.
5. Yes ➡️ Exempt under Administrative
6. No ➡️ Proceed to next category.
7. Professional
   • Learned Professional: Requires advanced knowledge in a field of science or learning acquired through prolonged education.
   • Creative Professional: Requires invention, imagination, originality, or talent in a recognized artistic or creative field.
8. Yes ➡️ Exempt under Professional
9. No ➡️ Proceed to next category.
10. Computer Employee
    • Engages in systems analysis, programming, or software engineering.
    • Paid either $684 per week or $27.63 per hour.
11. Yes ➡️ Exempt under Computer Employee
12. No ➡️ Proceed to next category.
13. Outside Sales
    • Primary duty is making sales or obtaining orders.
    • Regularly works away from the employer's business.
14. Yes ➡️ Exempt under Outside Sales
15. No ➡️ Proceed to next category.

1. Does the employee's job fall under one of these exemption categories?

4. Exemption Determined

If none of the job duties apply, the employee is Non-Exempt and is entitled to overtime pay.

What is FLSA Exemption?

Under the FLSA, employees are categorized as either exempt or non-exempt from overtime pay and minimum wage requirements. Exempt employees are not entitled to overtime pay (time-and-a-half) for hours worked over 40 in a workweek, whereas non-exempt employees are.

To qualify for exemption, employees must meet specific criteria related to salary level, salary basis, and job duties. These factors help ensure that employers fairly compensate employees who work beyond the standard 40-hour workweek.

Key Components of FLSA Exemption

There are three primary tests to determine whether an employee is exempt:

1. Salary Level Test
   • To be exempt, an employee must earn at least $684 per week, which amounts to $35,568 annually. If an employee earns below this threshold, they automatically qualify for overtime pay, regardless of their job duties.
2. Salary Basis Test
   • Exempt employees must be paid on a salary basis, meaning they receive a predetermined amount of pay each week, regardless of the number of hours worked. This distinguishes them from hourly employees, who are paid based on the hours they work.
3. Job Duties Test
   • In addition to meeting salary requirements, employees must perform certain duties that qualify them for exemption under one of five main categories: Executive, Administrative, Professional, Computer Employee, and Outside Sales.

Exemption Categories Explained

Understanding the different job duties that qualify for exemption is critical for HR professionals. Let’s dive into the primary categories:

1. Executive Exemption
   • Employees who manage the organization or a department, supervise at least two full-time employees, and have authority over hiring and firing decisions can be classified as exempt under the executive category.
2. Administrative Exemption
   • Employees who perform office or non-manual work related to business operations or management, and who exercise independent judgment in significant matters, may qualify under the administrative exemption.
3. Professional Exemption
   • The professional exemption applies to employees in roles requiring advanced knowledge (typically acquired through specialized education), such as doctors, lawyers, engineers, or creative professionals like writers and artists.
4. Computer Employee Exemption
   • This category includes certain high-level IT employees engaged in systems analysis, programming, or software development. To qualify, they must meet the salary threshold or be paid at least $27.63 per hour.
5. Outside Sales Exemption
   • Employees whose primary duty is making sales and who work regularly outside the employer’s place of business may be classified as exempt under the outside sales category.

Common Pitfalls in FLSA Exemption Classification

Incorrectly classifying employees as exempt can lead to serious legal and financial consequences, including back pay for overtime, penalties, and potential lawsuits. Some common mistakes include:

• Failing the Salary Test: Even if an employee’s duties suggest they could be exempt, not meeting the salary threshold disqualifies them.
• Misinterpreting Job Duties: Simply having a title like “manager” or “administrator” does not automatically make an employee exempt. Their actual job duties must align with FLSA requirements.
• Treating Hourly Employees as Exempt: Employees paid on an hourly basis are almost always non-exempt, even if they earn a high wage.

Ensuring FLSA Compliance

To maintain compliance, HR professionals should:

1. Conduct Regular Audits: Review employee classifications periodically to ensure compliance with evolving job roles and FLSA regulations.
2. Provide Training: Ensure HR staff and managers are well-versed in FLSA exemption criteria and the risks of misclassification.
3. Consult Legal Counsel: When in doubt, seek legal advice to ensure you are classifying employees correctly.

Conclusion

Properly identifying exempt and non-exempt employees not only helps safeguard the organization against potential legal issues but also fosters fair and transparent workplace practices. We encourage you to utilize the flow chart provided in this article as a practical tool to navigate the complexities of FLSA exemptions, ensuring that your decisions are well-informed and aligned with regulations.