Key Takeaways

  • The FLSA exemption test determines if an employee is exempt from overtime pay under federal labor law.
  • Exempt employees (executive, administrative, professional, outside sales, and certain computer roles) must meet both salary and duties tests.
  • The Department of Labor has implemented new salary thresholds, requiring higher minimum pay levels for exempt status.
  • The computer exemption is narrowly defined; only employees in roles like software engineers or systems analysts may qualify, not general IT support staff.
  • Employers face significant risks for misclassification, including back pay, penalties, and litigation.
  • Not all jobs are covered by the FLSA, but most private-sector and government positions are included.

What Is the FLSA Exemption Test?

The FLSA exemption test refers to the status of a job as outlined in the Fair Labor Standards Act. The FLSA determines whether a job is exempt or nonexempt as it relates to overtime obligations. Overtime pay, minimum wage, record requirements, age restrictions, and hours worked are some of the standards for employees outlined in this law.

Exempt Employees

Exempt employees, usually categorized as executive, professional, or administrative, are not covered by the protection of the FLSA and are consequently not entitled to overtime pay. These employees typically have comparatively advanced responsibilities for the company's operations on the whole, regardless of job title. The FLSA breaks this out into three main groups:

  • executive
  • professional
  • administrative

Non-Exempt Employees

Non-exempt employees have to be paid the prevailing minimum wage for the region and receive overtime pay for any work performed past 40 hours in a given week. In accordance with FLSA regulations, these employees are entitled to be paid time and one-half of their usual pay rate for each hour of overtime worked.

Jobs Excluded From FLSA Coverage

There are two common types of jobs that are entirely excluded from FLSA coverage:

  • Jobs that are specifically disqualified in the statute itself
  • Jobs that are administered by another precise federal labor law

Coverage Under the FLSA

While some jobs are excluded from FLSA coverage, the law applies broadly to employees of enterprises engaged in interstate commerce, which includes nearly all private-sector employers. Public-sector employees in federal, state, and local government are also covered. Exceptions are narrow and specifically defined in the statute.

It is also important to remember that state wage and hour laws may impose stricter requirements than federal law. For example, California requires daily overtime after eight hours, regardless of FLSA exemptions. Employers must comply with whichever law—state or federal—provides greater employee protection.

Definition of Overtime

Overtime is characterized as a scheduled time for employees to be on extra work duty resulting in time spent working during days off, on authorized vacation leave, paid leave, sick leave, paid military leave, compensatory time off, etc.

The Exemption Test

The FLSA uses five main exemption tests to decide if a job is non-exempt or exempt from overtime pay. The burden of proof is on the employer, as all work is designated as non-exempt until an employer completes one of the exemption tests and documents why they are not required to pay overtime.

Salary Basis and Threshold Requirements

To qualify for exemption under the FLSA exemption test, employees must generally meet both a salary basis requirement and a salary level threshold in addition to specific duties tests. The salary basis rule requires that an employee receives a fixed, predetermined salary that does not fluctuate with the number of hours worked.

In 2024, the Department of Labor issued an updated rule significantly raising the salary thresholds for exempt employees. Beginning July 1, 2024, the minimum weekly salary for most white-collar exemptions increased from $684 to $844 per week ($43,888 annually). On January 1, 2025, it will further increase to $1,128 per week ($58,656 annually). Highly compensated employees (HCEs) also saw changes, with the threshold moving to $132,964 annually in 2024 and to $151,164 in 2025.

These increases mean employers must regularly review employee pay structures to ensure compliance. Employers who fail to adjust salaries risk misclassification and potential liability for unpaid overtime.

The Executive Test

Positions that qualify for exemption under an executive test must include a key duty of managing the company or a routinely recognized department or subdivision of the business as well as pass the salary threshold. The person must also consistently and regularly manage the tasks of two or more full-time employees or equal representatives. They should also have the autonomy to fire or hire employees, as well as make relevant recommendations that are given the highest consideration.

The Administrative Test

This exemption test requires first passing a salary threshold. Then, under the administrative test, employees must have a principal duty of executing office and peripheral tasks associated with managing the general business operations of your employees or customers. The chief responsibility includes using discretion and autonomy to make judgment decisions based on priority.

The Professional Test

Once the salary requirement has been met, the professional test requires the employee to have exceptional knowledge and expertise needed to make and exercise careful discretion and judgment as it relates to primarily intellectual decisions. To qualify for the professional test, one must have highly-developed knowledge in a category of science or learning that has been acquired through extensive specialization, extensive intellectual training, or instruction.

The Outside Sales Test

This exemption test requires the employee to primarily work outside of the office and execute sales or work on contracts for services or goods. The most important requirement is that this employee must work almost extensively away from the primary business location performing tasks associated with initiating and closing a business sale.

The Computer Test

To meet the requirements for exemption under computer test, the employee needs to be working as a "computer programmer, computer systems analyst, software engineer, or another computer-skilled field." The main requirement is that they must execute the systems analysis procedures and techniques, including user consultations to determine system specifications, software or hardware.

The employee must be instrumental in the design, documentation, development, analysis, testing or modification of computer systems or programs. This includes prototypes, based on and related to system or user design specifications. They must also play a role in designing, documenting, testing, creating, or modifying computer programs related to machine operating systems. This test also requires the employee to pass a salary threshold.

Risks of Misclassification

Misclassifying employees as exempt when they do not meet the FLSA exemption test criteria can expose employers to costly consequences. Potential liabilities include:

  • Back pay for unpaid overtime, often covering a two- or three-year lookback period.
  • Liquidated damages equal to the unpaid wages.
  • Civil penalties and attorney’s fees.

Common areas of misclassification include administrative staff who lack true independent judgment, technical support employees mistakenly classified under the computer exemption, and lower-level supervisors who do not exercise genuine managerial authority.

Employers should regularly audit classifications and stay updated on federal and state law changes to avoid these risks.

Clarifying the FLSA Computer Exemption

The FLSA computer exemption is often misunderstood. It applies only to employees in roles that involve advanced computer knowledge and independent judgment. Examples include computer systems analysts, software engineers, and programmers engaged in duties such as:

  • Designing, developing, or testing software or operating systems.
  • Conducting systems analysis and recommending hardware or software changes.
  • Modifying or creating computer programs based on user specifications.

What does not qualify? Employees in roles such as IT help desk technicians, data entry clerks, or workers who simply install or maintain hardware generally do not qualify for the exemption. These positions may be non-exempt and entitled to overtime pay.

Employers should be cautious—job titles alone are insufficient. The actual job duties must align with the regulatory definitions to pass the FLSA exemption test.

Frequently Asked Questions

  1. What is the FLSA exemption test?
    It is a set of criteria under the Fair Labor Standards Act used to determine whether an employee is exempt from overtime pay requirements.
  2. What are the new FLSA salary thresholds?
    As of July 1, 2024, the minimum salary is $844/week, increasing to $1,128/week in 2025. Highly compensated employees must earn at least $151,164 annually in 2025.
  3. Who qualifies for the computer exemption?
    Only certain roles like programmers, software engineers, and systems analysts qualify. IT support and data entry roles generally do not.
  4. Can job titles alone determine exemption status?
    No. Actual job duties and salary must meet FLSA standards; titles alone are not sufficient.
  5. What happens if an employee is misclassified as exempt?
    Employers may owe back overtime, liquidated damages, penalties, and attorney’s fees.

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