FLSA duties test: exempt vs non-exempt employee classification

Executive overview

Misclassifying employees as exempt when they are not triggers Department of Labor penalties, public shaming, and double back pay lawsuits. The FLSA duties test is the legal checklist HR must apply to determine whether an employee qualifies as exempt from overtime.

The DOL raised the minimum salary threshold for exempt status to $1,059/week ($55,068/year). Six categories of employees can qualify — each has its own criteria beyond the salary floor.

Get the duties test wrong and a court can rule it intentional, doubling every back-pay liability.

The six exempt employee categories

1. Executive — salary ≥ $1,059/week; primary role is leadership over a department or subdivision; manages 2+ FTEs; influences hiring/firing decisions.
2. Administrative — salary ≥ $1,059/week; primary work is office or non-manual work tied to management or business operations; requires independent judgment.
3. Learned professional — salary ≥ $1,059/week; primary duty requires advanced intellectual knowledge in a field of science or learning, acquired through specialised instruction.
4. Creative professional — salary ≥ $1,059/week; primary duty involves invention or application of imagination within the role.
5. Computer employee — salary ≥ $1,059/week; works as systems analyst, programmer, software engineer, or equivalent.
6. Outside sales — no salary floor; primary duty is making sales or obtaining contracts; must work outside the office.
7. Highly compensated — earns ≥ $143,988 annually and ≥ $1,059/week in base salary; must regularly perform at least one duty of an exempt executive, administrative, or professional employee.

Consequences of misclassification

• The DOL can publicly shame companies, damaging recruitment and employer brand.
• Employees who discover underpayment lose trust in leadership.
• Low morale and attrition follow, especially among those who were underpaid.
• If a court rules misclassification was intentional, back pay is doubled for every affected employee.

The Shipcom case

• Shipcom, a Texas software company, misclassified non-exempt employees, denying them overtime pay.
• They corrected the error and paid what was owed — but employees still sued.
• The court found no evidence the underpayment was accidental and ruled it intentional.
• Result: double back pay to all affected employees.
• An accurate time-and-attendance system could have caught the error before it reached court.