FLSA Compliance Simplified: The Definitive Guide to Exempt vs. Non-Exempt

Target Keywords: flsa compliance, exempt vs non-exempt, overtime rules, salary threshold 2024, hr certification, administrative exemption
Word Count: 3,500+ words
Intent: Educational – Comprehensive Guide

Introduction

If there is one law that keeps HR Directors awake at night, it is the Fair Labor Standards Act (FLSA).

Why? Because the math is brutal.
If you misclassify a single employee as “Exempt” when they should be “Non-Exempt,” you don’t just owe them back wages. You owe them for every hour of overtime they worked for the last two (or three) years. You owe double damages. And you owe their attorney’s fees.
A single mistake can cost six figures.

For PHR, SPHR, and SHRM-CP candidates, the FLSA is a cornerstone topic. You cannot pass the exam without mastering the “Three Tests.”

This guide is your safety manual. We are going to strip away the legalese and give you the plain-English rules for classification, overtime, and the new 2024/2025 salary thresholds that are changing everything.

Part 1: The Three Tests (The Golden Rule)

You cannot just “decide” someone is exempt because they have a fancy title or because they “don’t want to punch a clock.”
To be Exempt (not eligible for overtime), a role must pass ALL THREE tests:

Salary Basis Test: Do they get a guaranteed check?
Salary Level Test: Do they make enough money?
Duties Test: Do they actually do management work?

If they fail any one of these, they are Non-Exempt. Period.

Part 2: The Salary Basis Test (The Guarantee)

An exempt employee must receive a predetermined amount of pay each week that is not subject to reduction because of variations in the quality or quantity of work.

The “No Docking” Rule

If an exempt employee works for 1 hour on Monday and goes home sick, you pay them for the full day. (Unless you have a bona fide sick leave plan and they are out of days).
* The Risk: If you dock their pay because “we were slow today” or “you left early,” you have just treated them like an hourly worker. You have “pierced the corporate veil” on their exemption. You might lose the exemption for everyone in that job class.

Exceptions

You can dock pay for:
* FMLA leave.
* Full-day absences for personal reasons.
* Disciplinary suspensions (for serious safety violations).
* The first and last week of employment.

Part 3: The Salary Level Test (The Moving Target)

This is where the ground is shifting under our feet.

The Thresholds

For decades, the threshold was low ($23,660).
Then it jumped to $35,568.
As of July 1, 2024: The threshold increased to $43,888 ($844/week).
As of Jan 1, 2025: The threshold is scheduled to jump again to $58,656 ($1,128/week).

The Impact: If you have an Assistant Manager making $45,000, they are Non-Exempt. It doesn’t matter if they manage 50 people. They don’t pass the salary test. You must pay them overtime.

Part 4: The Duties Test (The “Primary Duty”)

This is the hardest part. The “Primary Duty” is the principal, main, major, or most important duty that the employee performs.

1. Executive Exemption

Primary Duty: Managing the enterprise or a department.
Supervision: Must customarily direct the work of 2 or more full-time employees (or their equivalent, e.g., 4 part-timers).
Authority: Must have the authority to hire/fire or their suggestions are given “particular weight.”
Trap: The “Working Supervisor.” If a shift lead spends 90% of their time stocking shelves and only 10% making schedules, they are likely Non-Exempt.

2. Administrative Exemption

Primary Duty: Office/non-manual work directly related to management or business operations.
Discretion: Must exercise discretion and independent judgment with respect to matters of significance.
Trap: The “Administrative Assistant.” Most admins follow a playbook. They don’t create policy. Therefore, most are Non-Exempt.
Who Fits: Marketing Specialists, HR Generalists, Financial Analysts.

3. Professional Exemption

Learned Professional: Requires advanced knowledge (usually a degree).
- Examples: Doctors, Lawyers, Architects, Engineers, Teachers.
Creative Professional: Invention, imagination, or talent in an artistic field.
- Examples: Musicians, Actors, Writers.

4. Computer Professional Exemption

Must be a Systems Analyst, Programmer, or Software Engineer.
Trap: IT Help Desk. Troubleshooting a printer is not “systems analysis.” Most Help Desk roles are Non-Exempt.

Part 5: Overtime and “Hours Worked”

For Non-Exempt employees, you pay time-and-a-half for all hours over 40 in a workweek. (Note: California has daily overtime rules, but federal law is weekly).

What Counts as Work?

Waiting Time: If they are “engaged to wait” (receptionist reading a book), they are paid.
On-Call: If they cannot use the time effectively for their own purposes (5-minute response time required), they are paid.
Training: Paid, unless it is voluntary, outside normal hours, and not job-related.

The Travel Time Trap

This is a favorite exam question.
* Commute: Home to Work = Unpaid.
* Travel During the Day: Site A to Site B = Paid.
* One-Day Assignment: Driving to a client in another city = Paid (minus normal commute time).
* Overnight Travel: Travel during normal work hours (even on weekends) is paid. Travel outside normal hours as a passenger (on a plane) is not paid.

Part 6: Common FLSA Violations to Avoid

1. “Salaried Non-Exempt” Confusion

You can pay a Non-Exempt person a salary. But you still have to track their hours and pay overtime on top of that salary.
* Myth: “He’s salaried, so he doesn’t get overtime.” False. Salary refers to the pay method, not the status.

2. Comp Time

In the private sector, you generally cannot give “Comp Time” (time off next week) instead of overtime pay.
* You must pay the cash.
* (Public sector employees like police/fire have different rules).

3. Independent Contractor Misclassification

You cannot just hire a “1099 contractor” to avoid overtime if they act like an employee. The DOL uses the “Economic Reality Test” (and now the new 2024 final rule) to see if they are economically dependent on you.

Part 7: How to Conduct an FLSA Audit

Don’t wait for a lawsuit. Audit your jobs now.

Review Job Descriptions: Do they reflect reality?
Interview Employees: “Walk me through your day. How much time do you spend on X vs Y?”
Check the Math: With the new 2025 threshold ($58k), pull a list of all Exempt staff making less than $60k. You have a decision to make:
- Option A: Raise their pay to keep the exemption.
- Option B: Reclassify them as Non-Exempt and pay overtime.

Conclusion

FLSA compliance is binary. You are either right, or you are liable.

As an HR leader, your job is to be the guardian of the classification. Managers will push to make everyone Exempt “to save money.” You must explain that misclassification saves pennies today to cost millions tomorrow.

Master the three tests. Watch the salary threshold. And when in doubt? Pay the overtime.

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