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FLSA classifications and exemptions

The Fair Labor Standards Act (FLSA) sets minimum wage, overtime pay, recordkeeping, and child labor standards. Unless exempt, covered employees must be paid at least the minimum wage and not less than 1.5 times their regular rate of pay for overtime hours worked. In addition to the federal FLSA, state laws often govern employee wages and hours.

Some states have laws that are different than federal ones — often to the employees’ favor. Employers must follow state wage and hour laws that are more beneficial to employees.

Even an employer not covered by the FLSA (and the employees not covered by the individual provision) may still be subject to state laws. State labor agencies often adopt laws for minimum wage, overtime, or child labor that may apply to small organizations.

Employers covered by the FLSA will also need to evaluate state laws. Federal law does not automatically supersede state requirements.

Classifying employees

There is no legal obligation to classify employees as exempt, and companies always have the option to pay overtime. All employees are assumed to be nonexempt (entitled to overtime) unless the employer can demonstrate that a specific exemption applies (literally, an exemption from overtime). Employers are not required to classify an employee as exempt, even if the position fits the criteria, and they always have the option to apply nonexempt status.

If an exemption is applied, a company bears the burden of proving that it fits the position or the employee. If not, the individual may file a wage claim for back overtime pay. These claims can be costly, especially if they involve large numbers of employees.

Exempt employees

Human resources (HR) should always closely compare the exact terms and conditions of an exemption with the employee’s actual duties before assuming the exemption might apply to the employee. Among a group of employees with the same job titles or duties, some may be classified as exempt and some nonexempt.

The most commonly known exemptions are the “white-collar” categories. An employee has to meet specific criteria outlined for the claimed exemption. Otherwise, the employee could file a claim for wrongful denial of overtime pay.

There are other exemptions, such as interstate truck drivers, certain commissioned sales employees, and certain agricultural exemptions.