FLSA Exempt Test: How HR and Compensation Teams Can Get Classifications Right

Introduction

The FLSA exempt test determines whether a position qualifies for exemption from federal overtime and minimum wage requirements under the Fair Labor Standards Act. For HR and compensation teams, applying this test correctly is one of the highest-stakes decisions in workforce management—get it wrong, and your organization faces back pay, liquidated damages, and potential class action exposure across entire job families.

This article focuses on U.S. white-collar exemptions: executive, administrative, professional, computer, and outside sales categories, plus the highly compensated employee exception. It does not cover union contract interpretation, time-clock mechanics, or non-U.S. labor regimes. The target audience is HR, compensation, and total rewards professionals responsible for job design, pay structures, and FLSA classification decisions—readers who understand basic HR concepts but are not employment attorneys.

The core answer: The FLSA exempt test is a three-part framework combining a salary level test, a salary basis test, and category-specific duties tests. An employee must satisfy all three components to be classified as exempt from overtime pay requirements under federal law.

By the end of this article, you will understand:

How the salary and duties tests work together under the Fair Labor Standards Act
How to apply each white-collar exemption category to real roles
Where organizations most often misclassify positions—and how to avoid those mistakes
How modern tools like SalaryCube’s FLSA Classification Analysis Tool can support defensible, auditable classification workflows
Practical steps for integrating FLSA analysis into your broader compensation strategy

Understanding the FLSA Exempt Test

The FLSA exempt test is the legal framework employers use to determine whether a position is exempt from federal minimum wage and overtime pay protections. When a role is classified as exempt, the employee is not entitled to premium pay for hours worked beyond 40 in a workweek. When classified as nonexempt, the employee must receive overtime compensation at 1.5 times their regular rate.

This test is not a single checkbox. It is a three-part evaluation: the salary level component, the salary basis component, and the duties tests. All three must be satisfied for an exemption to apply. Job titles, internal leveling systems, or offer letters do not control—actual compensation structure and job duties determine exempt status.

The following sub-sections break down each component so HR and compensation teams can apply the FLSA exempt test accurately and consistently.

Salary Level Component of the FLSA Exempt Test

The salary level test sets a minimum compensation threshold that most exempt employees must meet. As of July 1, 2024, the federal threshold for executive, administrative, and professional (EAP) exemptions is $844 per week, equivalent to $43,888 annually. Beginning January 1, 2025, this increases to $1,128 per week ($58,656 annually), with triennial updates scheduled from 2027.

These thresholds apply to most white-collar exempt roles. Highly compensated employees have a separate, higher threshold discussed later. U.S. territories may have different levels, and certain categories like outside sales have no salary threshold requirement at all.

Nondiscretionary bonuses and incentive payments can count toward up to 10% of the standard salary level, provided they are paid at least annually. This flexibility can affect how organizations structure variable compensation for roles near the threshold.

If an employee’s weekly pay falls below the applicable threshold in any workweek—even temporarily—the exemption may not apply for that period. The salary level test must be satisfied alongside the salary basis and duties tests to determine exempt status.

Salary Basis Component of the FLSA Exempt Test

The salary basis test requires that exempt employees receive a predetermined, fixed amount each pay period regardless of the quantity or quality of work performed. This means the employee must receive their full salary for any week in which they perform any work, with only limited exceptions.

Improper deductions that can jeopardize exempt status include docking pay for partial-day absences, reducing salary due to low productivity, or penalizing employees for minor disciplinary infractions. These practices treat the employee like an hourly worker and undermine the salary basis requirement.

Legitimate deductions include absences of one or more full days for personal reasons, unpaid leave under the Family and Medical Leave Act, and prorated pay for the first or last week of employment. HR must align leave policies and manager practices with these rules to avoid inadvertently converting exempt employees to nonexempt status.

Even if both salary components are met, the employee’s primary duty must also satisfy a specific exemption category. Salary alone does not determine exempt status—duties tests control.

Duties Tests for White-Collar Exemptions

The duties tests define what type of work an employee must primarily perform to qualify for a white-collar exemption. The Fair Labor Standards Act applies different standards for executive, administrative, professional, computer, and outside sales roles. Each category has specific criteria focused on the employee’s primary duty—the principal, most important function of the position.

Highly compensated employees use a streamlined duties test, but they must still regularly perform at least one duty associated with the executive, administrative, or professional exemptions. High pay alone is never sufficient.

Certain roles are categorically excluded from white-collar exemptions regardless of pay. Manual laborers, production line workers, and first responders such as police officers, firefighters, and paramedics are generally nonexempt employees, even if they hold supervisory titles or earn substantial salaries.

The next section walks through each duties test category with practical criteria HR teams can use when classifying roles or auditing existing job descriptions.

Key FLSA Exempt Categories and How the Tests Apply

After confirming that a role meets the salary level and salary basis requirements, HR must apply the category-specific duties tests. Each exemption has distinct criteria, and the employee qualifies only if their primary duty matches one of the recognized categories.

The following sub-sections outline practical criteria and examples for each exemption, helping compensation teams build accurate job descriptions and make defensible classification decisions.

Executive Exemption Duties Test

The executive exemption applies to management-level roles. To qualify, the employee’s primary duty must be managing the enterprise or a customarily recognized department, they must regularly direct the work of at least two full time employees or their equivalent, and they must have authority to hire or fire other employees—or their recommendations on employment decisions must carry particular weight.

Management duties typically include budgeting, staffing, scheduling, performance management, and setting operational priorities. This differs from senior individual contributors who may have significant expertise but do not direct other employees or control department resources.

A store manager who controls scheduling, manages budgets, hires and disciplines staff, and runs daily operations likely qualifies. A “team lead” who performs the same production tasks as teammates, assigns work occasionally, but lacks hire/fire authority or real supervisory control likely does not.

Gray areas arise with “working supervisors” or “player-coaches” who spend substantial time on frontline work. Precise job analysis and documentation are critical—job titles like “manager” or “supervisor” do not automatically satisfy the executive exemption.

Administrative Exemption Duties Test

The administrative exemption covers office or non-manual work directly related to management or general business operations of the employer or the employer’s customers. The employee’s primary duty must include the exercise of discretion and independent judgment with respect to matters of significance.

“Directly related to management or general business operations” means work that helps run the business—functions like human resources, finance, compliance, operations strategy, procurement, or legal support. This is distinct from production work, where employees create the organization’s goods or deliver its services.

Discretion and independent judgment involves comparing and evaluating possible courses of action and making decisions that affect business outcomes. Routine application of established procedures—even complex ones—does not meet this standard unless the employee has real authority to interpret, deviate, or commit resources.

Roles that typically qualify include HR business partners, financial analysts, and compliance officers who shape policies and make recommendations that carry weight. Roles that generally do not qualify include accounts payable clerks, customer service representatives following set scripts, or data entry staff. This is one of the most frequently misapplied exemptions, making clear job design and documentation essential.

Professional Exemption Duties Test

The professional exemption has two subtypes: learned professionals and creative professionals. Learned professionals perform work requiring advanced knowledge in a field of science or learning, customarily acquired through prolonged specialized intellectual instruction—typically signified by an advanced degree such as a JD, MD, or engineering license.

Examples include attorneys, physicians, registered nurses in many contexts, architects, engineers, and certified public accountants. Bookkeepers, technicians, or support staff who do not independently apply advanced knowledge typically do not qualify, even if they work in a professional environment.

Creative professionals perform work requiring invention, imagination, originality, or talent in a recognized field of artistic or creative endeavor. This includes novelists, composers, actors, and graphic designers whose work depends primarily on their creative input rather than standardized templates or scripts.

Some professions—such as lawyers, doctors, and teachers at an educational establishment—are exempt without meeting the standard salary test, though duties requirements still apply. HR should avoid classifying technicians or support roles as professional exempt when their work is primarily routine or procedural.

Computer Employee Exemption Duties Test

The computer employee exemption applies to roles like computer systems analyst, computer programmer, software engineer, or other similarly skilled worker in the computer field. To qualify, the employee’s primary duty must consist of systems analysis techniques and procedures, design and development of computer programs related to user or system design specifications, or work involving machine operating systems and system functional specifications.

This exemption has unique pay options. Employees can be paid on a salary or fee basis at or above the standard EAP threshold, or they can be paid hourly at a rate not less than $27.63 per hour. Some states, such as California, impose significantly higher thresholds for computer employees—HR must check both federal and state rules and apply whichever is more protective.

Roles that do not typically qualify include help desk staff, IT support technicians, and employees who primarily install or troubleshoot software using scripts or standard procedures. The exemption targets high-level systems analysis and programming, not routine technical support.

Blended roles in modern IT teams—product/engineering hybrids, DevOps, or data engineering—require careful duty-by-duty analysis. The FLSA exempt test looks at what the employee actually does, not the job title.

Outside Sales Exemption Duties Test

The outside sales exemption applies to employees whose primary duty is making sales or obtaining orders or contracts for services or facility use, and who are customarily and regularly engaged away from the employer’s place of business. Unlike other white-collar exemptions, there is no minimum salary threshold.

Genuine outside sales roles involve field work—visiting customer locations, making face-to-face pitches, and closing deals away from the office. Inside sales representatives, call center staff, and retail salespeople who work on the employer’s premises or a fixed location generally do not qualify.

Hybrid roles that blend field and inside sales require close analysis. The key question is whether the employee is “customarily and regularly” engaged outside the employer’s premises. With remote work becoming more common, ambiguity around what constitutes the employer’s place of business has increased, making conservative classification advisable for borderline cases.

Highly Compensated Employee (HCE) Exemption

Highly compensated employees are subject to a streamlined duties test. To qualify, the employee must earn at least $132,964 in total annual compensation (rising to $151,164 in 2025), be paid at least the standard weekly salary threshold on a salary or fee basis, and regularly perform at least one duty associated with an executive, administrative, or professional exemption.

Total annual compensation can include base salary, commissions, and nondiscretionary bonuses. However, high pay alone is not enough—the employee must perform at least one identifiable exempt duty on a regular basis.

The HCE exemption is not a shortcut for roles with primarily manual, production, or routine work. If an employee’s duties do not include any management, discretion and independent judgment, or advanced knowledge functions, they do not qualify regardless of earnings. Additionally, some states do not recognize the HCE exemption, so HR must verify state-level requirements before relying on this category.

Applying the FLSA Exempt Test in Practice

Understanding the legal framework is only part of the challenge. HR and compensation teams need repeatable, documented processes to apply the FLSA exempt test consistently across potentially hundreds or thousands of roles.

This section outlines a structured classification workflow, compares manual versus software-supported approaches, and explains how FLSA analysis integrates with job design and pay structures.

Step-by-Step Process for Running an FLSA Exempt Test

A systematic approach reduces risk and creates defensible records. The following steps provide a practical workflow for HR and compensation teams:

Inventory positions and collect job data – Gather current job descriptions, org charts, reporting relationships, and compensation details for each role under review.
Evaluate salary level and salary basis compliance – Confirm whether each role meets the applicable federal (and state) salary threshold and is paid on a proper salary or fee basis.
Analyze primary duties against exemption categories – Walk through the executive, administrative, professional, computer, and outside sales tests systematically, documenting which category (if any) applies.
Decide and document the classification with rationale – Record the selected exemption, the specific duties that support it, and the approvers involved.
Align pay practices to classification – Ensure nonexempt roles have overtime tracking and exempt roles do not have improper salary deductions.
Communicate changes to managers and employees – Provide clear guidance when roles are reclassified, including any changes to timekeeping or compensation.
Schedule periodic reviews – Reassess classifications annually or whenever roles materially change in scope or duties.

For edge cases, involve legal counsel before finalizing decisions. Consistency across business units and geographies is critical to avoid creating conflicting classifications for similar roles.

SalaryCube’s FLSA Classification Analysis Tool can automate or streamline each step with standardized questionnaires, side-by-side duty comparisons, and built-in audit trail storage.

Comparing Manual vs. Software-Supported FLSA Exempt Testing

Many organizations still rely on spreadsheets, static memos, and ad hoc reviews for FLSA classification. This approach can work for small teams with stable job structures, but it introduces risk as headcount, role complexity, and regulatory changes increase.

Criterion	Manual / Ad Hoc Approach	Software-Supported Workflow (e.g., SalaryCube)
Speed	Slow—requires manual data gathering and analysis	Fast—centralized data, guided questionnaires
Consistency	Variable—depends on individual reviewers	High—standardized tests across all roles
Auditability	Limited—scattered documents, version control issues	Strong—date-stamped records, exportable audit trails
Integration	Disconnected from job descriptions and pay data	Connected to job architecture and compensation benchmarking
For smaller organizations with few roles and low turnover, manual processes may be manageable. As headcount grows, turnover increases, or regulatory thresholds change, a purpose-built tool like SalaryCube becomes more practical—reducing time spent, improving defensibility, and integrating classification with broader compensation workflows.

Integrating the FLSA Exempt Test with Job Design and Pay Structures

FLSA classification decisions should not operate in isolation from broader compensation strategy. Job architecture, pay bands, and market pricing all intersect with exempt status.

Using structured job descriptions—such as those built in SalaryCube’s Job Description Studio—allows HR to encode exemption assumptions directly into each role’s responsibilities. Fields like supervision requirements, discretion level, and education expectations become part of the job profile from the start.

Compensation benchmarking tools like DataDive Pro and Bigfoot Live support salary level decisions by providing real-time market data. This ensures exempt roles are priced above thresholds and aligned with external market rates—not just legally compliant, but competitively positioned.

Even with strong processes and tools, common challenges still arise. The next section addresses recurring pain points and how to handle them.

Common FLSA Exempt Test Challenges and How to Address Them

HR teams regularly encounter gray areas when applying the FLSA exempt test. Hybrid roles, evolving DOL rules, manager assumptions about titles, and remote work all create classification complexity.

This section surfaces recurring patterns and offers practical responses.

Misclassifying “Lead” or “Coordinator” Roles as Exempt

Organizations frequently treat senior individual contributors or team leads as executive or administrative exempt based solely on titles. This is one of the most common misclassification errors.

Consider a “Team Lead” who performs the same production work as teammates, assigns tasks occasionally, but has no hire/fire authority, does not set budgets, and does not regularly direct two full time employees. This role likely fails the executive exemption test despite the title.

The fix is duty-based: conduct audits of roles with lead, coordinator, or senior titles. If they lack real management authority, reclassify them as nonexempt and update job descriptions to reflect actual responsibilities.

Hybrid and Remote Roles that Blur Duties Tests

Modern roles often span multiple exemption categories. A customer success manager may handle strategic account planning (administrative-like) while also performing routine service tasks (production-like). A technical marketer may blend creative content development with data analysis.

The FLSA exempt test focuses on primary duty—the principal, most important function—not a list of occasional higher-level activities. HR should conduct structured job analysis interviews to determine which duties truly dominate and document the rationale.

Tools like SalaryCube support this process by providing standardized questionnaires and side-by-side comparisons, making it easier to classify hybrid roles consistently.

Keeping Up with Changing Salary Thresholds and State Rules

Static pay bands can fall behind new federal thresholds or stricter state standards. California, New York, and Washington, among other states, set higher salary thresholds than federal law, and some have narrower definitions of exempt duties.

HR teams should build calendar reminders or system-based alerts to review salary levels in advance of known regulatory changes. When both federal and state rules apply, the employer must follow whichever is more protective of employees.

Leveraging real-time market data from tools like Bigfoot Live helps compensation teams adjust ranges proactively—keeping exempt salaries both compliant and competitive.

Documenting the FLSA Exempt Test for Audit and Litigation Readiness

If the DOL or plaintiffs’ counsel challenges classifications, documentation is the first line of defense. Ad hoc decisions without written rationale are difficult to defend.

A defensible record should include: the date of review, data sources used, the selected exemption, the specific duties that justify the classification, and the approvers involved. Version history matters—if duties or pay change, the record should reflect updates.

SalaryCube’s FLSA Classification Analysis Tool stores this documentation centrally, maintains version history, and allows HR to export reports for audits or legal review.

Conclusion and Next Steps

The FLSA exempt test hinges on three components: salary level, salary basis, and primary duties. An employee must satisfy all three to be classified as exempt from overtime pay under the Fair Labor Standards Act. Misclassifying even a single job family can create significant back pay and penalty exposure—especially when the same error is applied across many employees.

Systematic, data-driven classification processes are far safer than ad hoc, title-based decisions. When FLSA analysis is integrated with job design and compensation benchmarking, organizations can make faster, more defensible decisions that hold up to scrutiny.

Actionable next steps:

Select a pilot group of roles to re-test for exempt status using the three-part framework
Align job descriptions and pay bands with FLSA criteria, encoding exemption assumptions into role documentation
Schedule annual classification audits—or trigger reviews when roles materially change
Evaluate whether a tool like SalaryCube can replace spreadsheets and improve auditability
Review state-specific thresholds for any locations where you have employees

Related topics worth exploring next include pay equity analysis, salary range design, and job architecture—each of which connects directly to FLSA compliance and broader total rewards strategy.

If you want real-time, defensible salary data and integrated FLSA classification workflows your HR and compensation teams can actually use, book a demo with SalaryCube or watch interactive demos to see the platform in action.

Additional Resources

This section collects practical links and tools HR teams can use alongside their FLSA exempt testing process.

Salary Benchmarking Product – Real-time salary data and FLSA classification analysis
Bigfoot Live – Daily-updated salary insights for market pricing decisions
Free Tools – Compa-ratio calculator, salary-to-hourly converter, and wage raise calculator
Methodology and Security – Documentation on SalaryCube’s data sources and defensibility
DOL Fact Sheet #17A – Overview of exemption tests for executive, administrative, professional, computer, and outside sales employees (external resource)

This article provides general information for HR and compensation professionals. It is not legal advice. For specific classification questions, consult employment counsel.