Expert Insight: Why Proper Employee Classification Matters

One of the most important compliance obligations for any employer is ensuring that employees are properly classified as exempt or non-exempt under the Fair Labor Standards Act (FLSA).

While it’s easy to assume that someone with “Manager” or “Supervisor” in their title is automatically exempt, the reality is that titles don’t matter – what matters is whether the employee’s actual job duties and compensation meet the specific criteria for the applicable exemption category (executive, professional, administrative, computer-related, or outside sales).

What’s the Difference?

• Exempt employees are not entitled to overtime pay and are paid on a salary basis.

• Non-Exempt employees must be paid at least minimum wage and receive overtime pay for hours worked over 40 in a workweek.  

Why Titles Don’t Decide Exemption Status

Often, an employer will give someone a “Manager” title and assume they are automatically exempt. But under the FLSA, a “Manager” who spends most of their time ringing up customers, answering phones, or stocking shelves – without true authority over hiring/firing, managing other employees, or making significant decisions – would not meet exemption requirements.

Similarly, an “Administrator” who mainly performs routine clerical tasks may not qualify for the administrative exemption. This is why the DOL focuses on actual job duties and responsibilities, not job titles.

Employers must review what the employee truly does on a daily basis, along with how they are compensated, to determine the correct classification. Misclassification can lead to penalties and fines from the DOL, legal claims from employees, back pay liability, and damage to the Company’s reputation.

Employer Best Practices:

• Regularly review job descriptions and actual duties against the FLSA exemption tests.

• Train managers to understand classifications and why they matter.

• Avoid relying on titles or convenience when making classification decisions.

• When in doubt, seek professional guidance. At the end of the day, proper classification is more than a compliance requirement – it’s a safeguard for your business and your employees.