Many employers have positions that fail the duties test under the Fair Labor Standards Act (FLSA). Failing this test–which results in misclassifying employees–can be very expensive. With Congress reintroducing a law expanding overtime and the Department of Labor set to increase overtime eligibility in May, how employees are classified–salary (exempt) or hourly (non-exempt)–is very much on the government’s radar. Paying an employee the minimum salary set by the overtime threshold will not release an employer from the liability of misclassification! The employee’s job must also pass the duties test.
For the hourly pay exemption to apply, a position must meet one of the following duties tests:
- Executive exemption: Managing the organization, a department or a subdivision and directing the work of at least two employees regularly. Hiring and firing decisions or major input to those decisions also required.
- Administrative exemption: Primary duty is office or non-manual work directly related to management or general business operations of the employer or employer’s customers. Here is where many employers fail this exemption: the employee’s primary duty must include independent judgement on matters of significance. Office work alone does not meet this exemption.
- Professional exemption: Performing work requiring advanced knowledge through prolonged, specialized instruction and study in a field of science or learning must be the primary duty for an employee to meet the professional exemption.
The duties test is not hard–it is just overlooked when classifying employees. The duties test is every bit as important as paying a minimum salary when it comes to who is actually exempt under the law.
If you have questions about the status of your employees, we can help. We have a great fixed fee service to get you in compliance painlessly. Check out our Position Classification Service flow chart and description to learn more about this easy to use service.