FLSA Status – All You Need to Know About It

12 of September, 2022

Paying employees can be a stressful task for an employer, especially if it is something they have to do themselves. It is not only that you have to pay on schedule every time, but there are also a series of rules and regulations you need to comply with. One of the biggest regulations is the Fair Labor Standards Act (FLSA Status). In this article, we go through everything you need to know about this term.

What is FLSA Status?

All FLSA regulations don’t apply to every employee in the same way. Depending on where an employee stands in the light of the FLSA, regulations are sure to vary. This is where an employee’s FLSA status comes in. Under the FLSA, there are two types of employees; exempt employees and non-exempt employees.

Who is an Exempt Employee?

An exempt employee is not entitled to overtime provisions and must be paid on a salary basis (with some exceptions). Employees with this status include:

• Executives
• Administrative workers
• Outside sales employees
• Professionals

Who is a Non-Exempt Employee?

A non-exempt employee is any employee who is entitled to overtime provisions and so is entitled to overtime pay for every hour worked beyond 40 hours in a workweek. These employees can be paid on any basis including salary or hourly.

How to determine an employee’s FLSA Status

You can determine an employee’s FLSA status with a series of three tests:

Salary level test

Here is the simplest test for determining FLSA status. To qualify as an exempt employee, an employee must earn at least $35,658 per year (or $684 per week). Employees who earn less than this are automatically non-exempt employees. 

To reach this minimum salary, an employee can include nondiscretionary bonuses, commissions, and other incentive payments, but this can make up no more than 10% of the standard salary level. 

Salary basis test

Once an employee passes the salary basis test, then you move to the salary basis test. This test inquires on what basis an employee gets a paycheck. 

If an employee is paid on a salary basis i.e they are guaranteed a predetermined amount during a pay period regardless of how much time they work or the quality of their work, then they qualify as an exempt employee. If their pay varies depending on hours worked or they aren’t paid regularly, however, they are non-exempt employees.

Duties test

Passing both the salary level and the salary basis tests still doesn’t mean an employee is an exempt employee. For this to be the case, the employee must pass one more test — the duties test.

For an employee to be considered an exempt employee, he/she must perform primary duties which are considered exempt tasks as defined by the Department of Labor. Examples of these duties include executive duties, administrative duties, professional duties, computer-related duties, and outside sales duties.

Do all employers need to be concerned by the FLSA Status?

Despite the importance of the FLSA, it is not an all-encompassing regulation and there are a few employers and employees excluded from the act.

As a rule, the FLSA only applies to employers who make an annual sale of $500,000 or more. So if your business makes less than $500,000 in sales annually and doesn’t engage in interstate sales, then you do not need to worry about the FLSA. 

And even if you are not excluded from the FLSA as an employer, some of your employees could still be excluded from this act. Employees like this fall into one of two categories:

• Working jobs which do not qualify for overtime. For example, farm and movie theater workers.
• Working jobs governed by other labor laws which supersede the FLSA. For example, railroad workers and truck drivers.

If you have employees who fall into this category working for you, then you need not be concerned about the FLSA on their account.

Despite the existence of exclusions to the FLSA, it is likely that you and your employees are covered by this act than otherwise. For this reason, you must pay attention to the FLSA and determine the FLSA status of your employees. The guide above can help you determine that and avoid any fallout.