Misclassifying an employee as exempt is one of the most common — and most expensive — payroll mistakes we see. Here’s how the test actually works.
Under the Fair Labor Standards Act, exempt employees are not entitled to overtime pay, while non-exempt employees must be paid time-and-a-half for hours worked beyond 40 in a week. The classification isn’t a choice you make based on job title or how a role is paid — it’s determined by a specific legal test.
To qualify as exempt, a position generally has to meet both a salary threshold and a duties test. The salary threshold sets a minimum weekly salary the employee must be paid regardless of hours worked. The duties test looks at what the employee actually does day to day — executive, administrative, and professional exemptions each have their own specific requirements around decision-making authority and the nature of the work.
The most common mistake is assuming that paying someone a salary automatically makes them exempt. It doesn’t. We regularly see “assistant manager” or “coordinator” roles that are paid a flat salary but spend most of their time on non-exempt tasks — a classification that wouldn’t hold up if challenged.
Getting this wrong isn’t a small risk: misclassification claims typically involve back overtime pay going back up to two or three years, plus potential penalties. If you have any salaried position where you’re not fully confident it would pass the duties test, that’s worth a compliance review before it becomes a claim.
Exempt vs. Non-Exempt Classification Checklist
A quick gut-check before you classify a role as exempt from overtime under the FLSA.
- Confirm the role meets the current FLSA salary threshold
- Confirm the role passes the applicable duties test (executive, administrative, or professional)
- Don’t assume a salaried position is automatically exempt
- Review “coordinator” or “assistant manager” titles that may be doing non-exempt work
- Estimate back-pay exposure for any role you’re not fully confident in