The Fundamental Distinction
The Department of Labor's federal Fair Labor Standards Act (FLSA) creates different time tracking requirements based on employee classification.
Non-Exempt Employees
Tracking Requirements
Must track:
- All hours worked per pay period
- Start and end times each day
- Break and meal periods
- Overtime hours (over 40/week)
- Total hours per week
Overtime Requirements
- Must be compensated at 1.5x regular rate
- For hours worked over 40 in a workweek
- Accurate tracking essential for compliance
- Automatic calculation recommended
Common Non-Exempt Positions
- Hourly workers
- Administrative staff
- Retail employees
- Manufacturing workers
- Customer service representatives
Exempt Employees
Tracking Requirements
- NOT required to track hours worked
- No overtime compensation required
- Paid on salary basis regardless of hours
- Focus on job completion, not time
Exemption Criteria
To qualify as exempt, employees typically must:
- Be paid on a salary basis (not hourly)
- Earn at least the FLSA minimum salary threshold
- Perform exempt job duties (executive, administrative, professional, or certain computer/outside sales positions)
Common Exempt Positions
- Managers and executives
- Professional roles (doctors, lawyers, teachers)
- Certain administrative positions
- Some computer professionals
- Outside sales representatives
Misclassification Risks
Consequences
- Backpay for unpaid overtime
- Liquidated damages (double backpay)
- Penalties up to $1,000 per violation
- Potential lawsuits
- DOL audits and investigations
Common Misclassification Errors
- Classifying employees as exempt based on salary alone
- Ignoring job duties test
- Assuming job titles determine exemption
- Not updating classifications with role changes
Best Practices for Compliance
Classification
- Regularly audit employee classifications
- Document exemption criteria
