Key Points

  • Fair Labor Standards Act (FLSA) employee classification is one of HR's most important functions. Classifying an employee as exempt means that the employer does not have to pay overtime when the employee works more than 40 hours in a given workweek.
  • However, employers that misclassify employees as exempt leave themselves vulnerable to lawsuits and DOL investigations, which can involve multiple employees and become tremendously costly.
  • The single most important rule to remember when classifying an employee is that it's an employee's job duties, not job title, that matter. A "senior manager" who doesn't direct the work of at least two full-time employees won't be exempt under the FLSA.
  • The most commonly applied exemptions are for executives, administrators, professionals, computer employees and outside salespersons. There are several other more narrow exemptions.

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