FLSA Status Explained: What It Means & Why It Matters for Employers

FLSA Status Definition:

FLSA status refers to whether an employee is exempt or nonexempt under the Fair Labor Standards Act (FLSA). This classification determines eligibility for overtime pay, impacts payroll and time tracking, and plays a key role in HR compliance. Employers who misclassify workers risk legal penalties, back pay, and audits by the Department of Labor (DOL).

• Exempt employees are not entitled to overtime pay.

• Nonexempt employees must be paid overtime (1.5x) for hours worked over 40 in a week.

Correctly classifying employees is essential to remain compliant with federal labor laws and avoid costly fines or lawsuits.

What Is FLSA Status?

What is FLSA status? FLSA status determines whether a U.S. employee is exempt or nonexempt from the overtime pay and minimum wage requirements outlined in the Fair Labor Standards Act (FLSA).

This classification impacts:

• Overtime eligibility

• Payroll processing

• HR compliance risk

• Job descriptions and expectations

Under federal labor law, the U.S. Department of Labor’s Wage and Hour Division (WHD) enforces the FLSA and ensures fair pay practices across industries.

Exempt vs. Nonexempt: Key Differences

How to Determine FLSA Status (3-Step Checklist)

1. Salary Basis Test
   Is the employee paid a consistent salary regardless of hours worked?

2. Salary Level Test
   Do they earn at least $684/week (as of 2025)?

3. Duties Test
   Do their job duties fit one of the FLSA exemptions (executive, administrative, professional, computer, or outside sales)?

If an employee fails any of these, they are likely nonexempt and entitled to overtime pay.

Examples of Exempt vs. Nonexempt Employees

• Exempt Example: A marketing director earning $90,000/year who leads a team and makes strategic decisions.

• Nonexempt Example: An office coordinator earning $42,000/year who answers phones, schedules meetings, and performs clerical work—even if paid on a salary.

Common Mistakes Employers Make for FSLA

• Assuming salary = exempt

• Using job titles instead of duties

• Failing to update classifications

• Ignoring state-specific rules

1. Equating “Salaried” with “Exempt” 

Many employers assume that if an employee is paid a salary, they’re automatically exempt from overtime. This is false. To qualify for exempt status under the FLSA, employees must meet both a minimum salary threshold ($844/week or $43,888/year as of July 1, 2024) and specific duties tests tied to executive, administrative, or professional roles. Missteps here often result in expensive back pay liabilities.

2. Relying Solely on Job Titles

Labels like “manager” or “supervisor” don’t determine exemption status. The Department of Labor looks at actual job duties, not titles. A “Marketing Manager” who spends most of their time performing clerical tasks, for example, may not qualify as exempt—even if the title sounds authoritative.

3. Failing to Reevaluate as Roles Evolve

Job responsibilities often change over time, especially in growing businesses. Employers that fail to regularly audit FLSA classifications risk maintaining outdated exemptions. A one-time exemption decision isn't evergreen—regular FLSA audits should be part of your compliance process.

4. Overlooking State-Specific Exemption Rules

Many states (e.g., California, New York) have their own exemption tests and salary thresholds, which may be stricter than federal guidelines. Ignoring these can lead to violations even if you're compliant under the FLSA. Employers operating in multiple states must account for both federal and local laws, and apply the one most favorable to the employee.

Why FLSA Status Matters

Incorrect classification can lead to:

• Back pay for unpaid overtime

• Fines and penalties from the U.S. Department of Labor (DOL)

• Lawsuits and employee disputes

• Payroll and time tracking inconsistencies

FLSA Compliance Checklist for Employers

• Verify salary thresholds for each role

• Conduct regular duties tests

• Re-audit classifications annually

• Consider both federal and state rules

• Track hours for all nonexempt staff

• Store documentation in case of audit

How GoCo Helps with FLSA Compliance

With GoCo, you can:

• Digitize offer letters and classify roles correctly

• Automate time tracking and overtime alerts

• Store exemption documentation for audits

• Stay compliant with FLSA and state laws

FAQs About FLSA Status

Q: Can an employee be exempt and still get paid hourly?

A: Rarely. Most exempt employees must be salaried and meet strict job duty criteria.

Q: What happens if I misclassify an employee?
A: You may owe unpaid wages, back taxes, and face legal or regulatory action.

Q: Does FLSA apply to remote employees?
A: Yes. FLSA applies to all eligible U.S. employees, regardless of location.

Q: Does FLSA Apply to Remote or Hybrid Workers?

A: Yes. FLSA protections apply to all eligible U.S. employees, regardless of whether they work in-office, remotely, or on a hybrid schedule.

Q: Who enforces the FLSA?
A: The U.S. Department of Labor’s Wage and Hour Division (WHD) enforces FLSA rules and investigates violations.

Final Thoughts

FLSA classification isn’t just an HR formality—it directly impacts your payroll, legal compliance, and employee trust. Getting it right is essential, and GoCo’s all-in-one HR software makes it easier.

Need help staying compliant?
Book a demo to see how GoCo simplifies FLSA classification, time tracking, and payroll—without the headache.