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The Duties Test

Failure to pay overtime to qualified employees risks costly legal consequences. How do you know when and to whom you need to pay overtime? The FLSA Duties Test is a tool you need to be familiar and comfortable using. Let’s look at how to use it.

What Is the FLSA Duties Test?

The Fair Labor Standards Act (FLSA) governs the payment of overtime to employees. By understanding which duties qualify for overtime pay, you can properly pay your employees and avoid costly penalties.

The Fair Labor Standards Act was written to protect employees from not being paid for overtime. It clarifies which positions must be paid overtime and which positions are exempt from (not subject to) it.

It is the position of the U.S. Department of Labor that most employees should be paid overtime when they work more than 40 hours in a week. Some states have more stringent requirements than the federal requirements, like paying overtime for employees who work more than eight hours in a day, so be sure and check the laws in your state as well.

Why You Need to Understand the Duties Test

The Duties Test guides employers to appropriately pay employees entitled to overtime pay. Obviously, it’s important for employers to classify their employees correctly to comply with this requirement.

  • Misclassifying employees as exempt can be costly for employers. Understanding who is entitled to receive overtime pay and paying these employees appropriately protects employers from paying large fines and penalties.
  • Misclassifying employees as exempt denies non-exempt employees of legally earned wages. Not only does this hurt employees because of lower take-home pay, but it can also lead to mistrust and poor morale in the workplace.
  • Misclassifying employees can lead to embarrassing publicity if a Department of Labor audit exposes violations in pay practices. Doing the right thing for employees and complying with the law make good business sense and can protect the company from unwanted negative attention.

What Job Duties Make an Employee Exempt from Overtime Pay?

The Department of Labor has resources to help employers understand which positions qualify for overtime exemption. Because these exemptions are narrowly defined under the Fair Labor Standards Act, employers should carefully review the criteria for each.

Executive Exemption

The executive exemption applies to employees whose regular duties include management of a department or the enterprise. To qualify, the employee must manage two or more full-time employees or the equivalent of two full-time employees (such as one full-time employee and two half-time employees). The employee must also have the ability to hire, fire and promote the employees they manage, or have significant input into the decisions to hire, fire and promote their employees.

Administrative Exemption

The administrative exemption is used for employees whose work is related to the management of the company. These employees must exercise discretion and judgment in significant decisions made by the company. Positions that may qualify for this exemption are marketing and public relations managers, human resources managers, accounting managers, and other office workers who perform duties affecting the general operations of the business.

Professional Exemption

Two types of people qualify for the professional exemption: the learned professional and the creative professional.

The learned professional generally has specialized education, such as a college degree, and performs work in a field of science or learning. Doctors, lawyers, scientists and teachers are examples of learned professionals.

The creative professional performs work requiring creativity, artistic expression and imagination. Writers, film directors, graphic designers and artists are creative professionals.

Computer Employee Exemption

Computer systems analysts, computer programmers and software engineers are exempt to overtime pay under the computer employee exemption. Please note that this exemption requires skills such as analysis, design, creation of software programs and testing. Employees who set up hardware, such as an IT specialist, aren’t considered exempt because they don’t use the same level of skills.

Outside Sales Exemption

Employees who regularly work away from the office and whose primary duty is making sales qualify for the outside sales exemption. Some employers incorrectly include telemarketing employees in this exemption, but they do not meet the criteria for exemption.

Highly Compensated Employees

One final category of exemption is the highly compensated employee, who must perform non-manual work in addition to at least one of the duties of employees in another exemption. As long as they earn above the earnings threshold ( $107,432 in 2021) and meet the other requirements listed above, they are not entitled to overtime pay.

How Can Employers Avoid Duties-Test Errors?

Despite guidance from the Department of Labor, it is easy for employers to misclassify employees using the duties test. Here are some suggestions to help ensure the correct classification.

1. Never Rely on Job Titles Alone

Job duties, not job titles, are the basis on which the exemption is based. Calling someone a manager who doesn’t otherwise qualify under another exemption is not enough to qualify for an overtime exemption.

2. Regularly Audit Job Descriptions

The needs of a company changes, and so do positions. Auditing and updating job descriptions on a regular basis will help ensure the exemption status is appropriate to current job duties.

3. Involve Outside Expertise

Use an attorney or other expert to help analyze positions that don’t fit neatly within exemption categories. Some positions, like account managers, are difficult to classify because their duties may vary from company to company. Having an expert review job descriptions, apply the duties test, and document their analysis may save costly errors.

4. Employee Preference Should Not Guide Exemption Decisions

Some employees like the perceived status of not completing timecards, but employee preferences cannot govern these important decisions. Helping employees understand the benefits of receiving overtime pay should be enough to quell most concerns about status.

Questions You’ve Asked Us About the FLSA Duties Test

Do states have duties tests of their own?
Many states have their own duties tests. Employers should carefully review the duties tests in each state where they have employees to ensure compliance with both federal and state law.
Does the FLSA duties test apply to every profession?
There are exceptions to the duties tests for certain professions. These include commissioned employees of retail or service establishments, taxi drivers, domestic service workers living in the employer’s residence, farmworkers, and some employees of a non-metropolitan broadcasting station. For a complete list, check the Department of Labor website.(https://www.dol.gov/agencies/whd/compliance-assistance/handy-reference-guide-flsa#2).
What is the penalty for misclassification of employees?
Financial penalties include payment of back overtime pay, penalties, attorney’s fees and damages. Other penalties may even include criminal prosecution. When in doubt, it is best to err on the side of caution and classify employees as non-exempt.
Carol Eliason Nibley

Carol Eliason Nibley

Carol Eliason Nibley, SPHR, GPHR and Principal Consultant at PeopleServe, has more than 25 years of experience in human resources, most recently serving as Vice President of Human Resources for a technology company in Utah County. Carol has taught HR certificate courses at Mountainland Technical College and in other settings for more than 12 years.

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