How the FLSA duties test determines employee exemption status

Executive overview

Misclassifying employees as exempt when they're not leads to unpaid overtime liability — and potentially double back pay if the DOL finds intent. The FLSA duties test is a set of criteria HR must use to determine whether an employee is exempt or non-exempt from overtime requirements.

Six categories can qualify for exemption. Each has specific salary and job-function requirements. Getting it wrong, as Shipcom discovered, is costly.

Misclassification is not just a compliance risk — wilful underpayment results in double back pay penalties.

The six exemption categories

1. Executive — $684/week salary minimum; primary duty is managing a department or subdivision; supervises 2+ FTEs; input into hiring/firing decisions.
2. Administrative — $684/week salary minimum; primary duty is office or non-manual work related to management or business operations; role requires discretion and independent judgment.
3. Learned professional — $684/week salary minimum; primary duty requires advanced knowledge in a field of science or learning; knowledge acquired through prolonged specialised instruction.
4. Creative professional — $684/week salary minimum; primary duty involves creative pursuit, invention, or application of imagination.
5. Computer employee — $684/week salary or $27.63/hour; role is computer systems analyst, programmer, software engineer, or similar; primary duty is technical work in the computer field.
6. Outside sales — primary duty is making sales or obtaining contracts; must work outside the employer's place of business.
7. Highly compensated — $107,432+ annually; at least $684/week in base salary; customarily performs at least one duty of an exempt executive, administrative, or professional employee.

Consequences of misclassification

• The DOL can publicly name companies that misclassify — damaging recruitment and employer brand.
• Employees who discover underpayment lose trust in leadership.
• Poor morale and turnover follow when staff realise colleagues were underpaid.
• Wilful misclassification, as in the Shipcom case, results in double back pay to all affected employees.
• Using an HRAS with accurate time and attendance tracking reduces misclassification risk.