FLSA misclassification is common, costly and completely avoidable

Summary

Sid Lewis of Jones Walker argues that misclassifying employees under the Fair Labor Standards Act (FLSA) — most often treating nonexempt workers as exempt — is a frequent, expensive and entirely preventable mistake. The piece walks through the main exemptions (executive, administrative, professional, certain computer employees and outside sales), the current $684/week salary threshold, the duties and salary tests required for exemption, and common payroll pitfalls like bonus treatment, multiple pay rates and unlawful deductions. Employers face back pay, liquidated damages, attorney fees and a three‑year lookback when they get it wrong, so regular audits and attention to red flags are essential.

Key Points

Misclassification of exempt vs nonexempt employees is common and can lead to substantial liability.
Primary overtime exemptions: executive, administrative, professional, certain computer roles and outside sales — each requires specific duties and pay tests; the salary threshold cited is $684 per week.
To be exempt an employee must meet both the duties test and the guaranteed salary test; being paid hourly or suffering unlawful salary deductions strips exemption.
Certain bonuses inflate the regular rate for overtime calculations — incentive bonuses normally count, discretionary bonuses usually do not, but labelling alone won’t save you.
When a nonexempt employee works at different rates in the same week, employers must use a weighted average to calculate overtime unless there’s a prior written agreement allowing another method.
Liability can quickly escalate: overtime owed plus liquidated damages, legal fees and a three‑year statute of limitations can mean paying two to three times the basic overtime amount.
Prevention is straightforward: audit classifications regularly, review pay practices and bonus structures, and raise red flags when paying a set salary to roles that may not meet exemption tests.

Why should I read this?

Short and blunt: if you pay anyone a salary, this could land you in court. Read this to spot the payroll traps (salaried clerical staff, bonus rules, unlawful deductions) and take immediate, practical steps to avoid costly overtime claims.

Author style

Punchy: Sid Lewis lays out the law without fuss and issues a clear warning — getting classifications right is easy, yet employers regularly ignore it. If you want to avoid multi‑year wage claims, this is worth a proper read.

Source

Source: https://www.hrdive.com/news/flsa-exempt-nonexempt-classification/807280/