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The DOL 'Duties Tests': Understanding Who Can Be Exempt from Overtime Pay
May 4, 2023
Employee working from home with clock sitting on desk by laptop

Misclassifying workers as being exempt from overtime pay is a common mistake you can’t afford to make as an employer. If you deny certain employees overtime pay, you could be opening up your business to big fines and penalties under the Fair Labor Standards Act (FLSA).

The legal requirements can be hard to understand, especially if you don’t have the support of an HR expert.

Let’s look at the rules you must follow to ensure every employee is paid properly and fairly.

Exempt or Non-Exempt?

Under the law, employers must pay non-exempt (commonly referred to as “hourly”) employees at least the legal minimum wage, plus overtime pay at time-and-a-half.

For an employee to be considered exempt from overtime rules, he or she must be paid a salary of at least $455 per week/$23,660 annually (with limited exceptions) and satisfy one of the ‘duties tests’ defined by the Department of Labor (DOL). The salary amount cannot vary based on hours worked.

Applying the Duties Tests

This is where things start to get tricky, as you must now determine an employee’s specific job responsibilities to establish overtime-exempt status. Compensation is only half the equation, and job titles are not relevant to the classification.

Below are the most common DOL classifications for exempt employees.

The actual job duties test for each of these classifications is quite comprehensive and complex. However, here is a general overview.

  • Administrative Exemption – To pass this job duties test, employees must perform non-manual work, manage “back office” general business operations, and have decision-making authority on significant matters. An example might be an office manager or a marketing specialist – as long as he or she is entrusted to make independent business decisions regularly.
  • Executive Exemption – To pass the executive job duties test, employees must manage a team or department, supervise two or more employees, and have the authority to hire or fire. Calling someone a “manager” or “supervisor” isn’t enough if he or she doesn’t get involved in hiring and firing.
  • Learned Professional Exemption – To pass the learned professional job duties test, employees must perform intellectual tasks requiring advanced knowledge and specialized training in their fields. Lawyers, doctors, teachers, and scientists fall into this category.
  • Creative Professional Exemption – To pass the creative job duties test, employees must perform work requiring invention, imagination, originality, or talent in an artistic or creative field. Graphic designers, illustrators, writers, photographers, film directors, and similar roles typically fall under this exemption.
  • Outside Sales Exemption – To pass this duties test, an employee’s primary role must be making sales outside of the employer’s business location. Telemarketing sales reps, for example, do not fall under this exemption because they do not generally call on prospects at their places of business.

Review Employee Classification Carefully

Again, you should never rely on salary levels or job titles alone to determine an employee’s overtime eligibility. For an employee to be legally exempt from overtime, he or she must meet the minimum salary requirement and meet all criteria from one of the DOL job duties tests. The actual duties being performed are what matter.

Now that you’re more familiar with the requirements of the FLSA overtime rule, what is your next move? Consider conducting a thorough audit of each employee’s payroll status. If you discover improper employee classifications, immediately correct them to avoid legal risk.

To learn more about overtime rules and exemptions (and how to correctly classify independent contractors), watch the ComplyRight on-demand webinar, “Understanding the Distinctions When Classifying Workers.”

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Funded, in part, through a Cooperative Agreement with the U.S. Small Business Administration. All opinions, and/or recommendations expressed herein are those of the author(s) and do not necessarily reflect the views of the SBA.

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