The Fair Labor Standards Act (FLSA) remains one of the most important federal labor laws for employers. One area that continues to generate confusion (and lawsuits) is the distinction between exempt and non-exempt employees. Misclassification can expose employers to significant liability, including back pay, overtime, penalties, and attorneys’ fees.
What Is the FLSA?
The Fair Labor Standards Act, administered by the U.S. Department of Labor (DOL), sets the federal standards for:
- •Minimum wage
- •Overtime pay
- •Recordkeeping
- •Child labor protections
Under the FLSA, most employees are presumed to be non-exempt, meaning they are entitled to overtime pay at one and one-half times their regular rate for all hours worked over 40 in a workweek, unless they meet the criteria for an exemption.
Exempt vs. Non-Exempt: The Key Differences
| Category | Exempt Employees | Non-Exempt Employees |
| Overtime Pay | Not eligible for overtime | Must receive overtime for hours over 40 per week |
| Pay Basis | Must generally be paid a fixed salary | Can be paid hourly or salaried |
| Job Duties | Must meet specific “white-collar” tests (executive, administrative, professional, or HCE – see below) | No specific duties test required |
| Recordkeeping | Limited time records | Detailed timekeeping required |
The Four Primary Exemptions
To qualify as exempt, employees must generally the following tests:
- 1.Salary Level Test: As of 2025, most exempt employees must earn at least $1,128 per week ($58,656 annually).
- 2.Salary Basis Test: Employees must receive a fixed, predetermined salary that does not fluctuate based on the quality or quantity of work performed.
- 3.Duties Test: The employee’s primary job duties must fall within one of the recognized exemption categories:
- •Executive: Manages two or more employees and has authority over hiring, firing, or significant personnel decisions.
- •Administrative: Performs office or non-manual work related to management or general business operations, exercising discretion and independent judgment.
- •Professional: Performs work requiring advanced knowledge in a field of science or learning, typically acquired through specialized education.
- 4.Highly Compensated Employee (HCE) Exemption: The HCE exemption provides a streamlined test for employees who earn a higher level of total annual compensation. To qualify:
- •The employee must earn at least $151,164.00 per year, including at least $1,128 per week paid on a salary or fee basis;
- •The employee’s primary duty must include performing office or non-manual work; and
- •The employee must customarily and regularly perform at least one of the exempt duties of an executive, administrative, or professional employee.
Common Misclassification Pitfalls
Employers often stumble by assuming:
- •Paying a salary automatically makes an employee exempt (it doesn’t).
- •Job titles determine exemption status (they don’t).
- •Offering comp time instead of overtime is permissible for private employers (it usually isn’t).
- •High pay alone qualifies an employee as exempt (only if the HCE criteria are met).
Best Practices for Employers
- •Conduct Regular Audits: Review job descriptions, pay levels, and actual duties. Regular audits of employee classifications can help prevent costly wage-and-hour claims.
- •Stay Current on DOL Thresholds: Salary and HCE levels are subject to change and often do annually.
- •Train Managers: Ensure supervisors understand overtime rules and classification criteria.
- •Document Everything: Accurate pay and duty records are your best defense in a DOL audit.
Sarah Bachich and Bruce Loren of the Loren & Kean Law Firm are based in Palm Beach Gardens and Fort Lauderdale. Loren & Kean Law is a boutique law firm concentrating in construction law, employment law, and complex commercial litigation. Mrs. Bachich focuses her practice in employment law. Mr. Loren has achieved the title of “Certified in Construction Law” by the Florida Bar, exemplifying the Bar’s recognition of this expertise. Mr. Loren and Mrs. Bachich can be reached at bloren@lorenkeanlaw.com or sbachich@lorenkeanlaw.com or 561-615-5701.
