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Home » Glossary » FLSA Classification

FLSA Classification

Definition

FLSA Classification

Fair Labor Standards Act classification is the test deciding whether a United States worker is exempt from overtime and minimum wage. Duties decide it and salary only gates it, which is why job titles never settle the question alone.

Two separate questions hide inside the phrase. One asks whether a worker is an employee at all rather than an independent contractor. The other asks whether an employee is exempt.

Both are decided on substance. Neither is decided by what the contract calls the arrangement — a well-drafted agreement offers no protection when the facts point elsewhere.

The stakes are back pay, liquidated damages and legal costs — usually multiplied across everyone holding the same job code.

Key takeaways

  • The salary level for the white-collar exemptions is $684 per week, not the higher 2024 figure.
  • A court vacated the 2024 overtime rule nationwide, and the threshold reverted.
  • Computer employees paid hourly qualify at $27.63 an hour; outside sales has no salary test.
  • Employee-versus-contractor status turns on economic reality, not on the label in the agreement.

How it works

Exemption requires three things together: payment on a salary basis, payment at or above the set level, and a primary duty that fits one of the statutory categories. Fail any one and the worker is non-exempt.

The statute exempts “any employee employed in a bona fide executive, administrative, or professional capacity” and outside salespeople. The regulations then define each category in detail.

The executive test is the clearest illustration. It requires compensation on a salary basis “at a rate of not less than $684 per week”, a primary duty of management, regular direction of two or more employees, and genuine authority over hiring and firing.

ExemptionSalary gatePrimary duty
Executive$684 per weekManaging a department and directing two or more staff
Administrative$684 per weekOffice work with independent judgment on significant matters
Professional$684 per weekAdvanced knowledge in a field of science or learning
Computer employee$684 weekly or $27.63 hourlySystems analysis, design, development or testing
Highly compensated$107,432 a yearOne exempt duty, tested less strictly

The Department of Labor is blunt about the common error. “Job titles do not determine exempt status”, and neither does paying someone a salary rather than an hourly rate.

The threshold history matters because so much guidance is stale. A 2024 rule would have raised the level twice, but a federal court in Texas vacated it nationwide in November 2024.

The department moved to rescind that rule formally in May 2026, so $684 remains the operative figure — and any source quoting a higher number is describing a rule that never took effect.

Examples

Classification disputes cluster in a handful of roles rather than spreading evenly across an organisation. The examples below are the ones that recur in shared services and business process work, and each fails on a different element.

A team leader supervising fifteen agents is paid a salary above the threshold but has no say in hiring, firing or discipline. The salary gate is cleared and the duties test is not, so the role is non-exempt.

An analyst in a captive finance centre follows a fixed procedure with no discretion on significant matters. Administrative exemption fails, because independent judgment is the whole point of that category.

A help-desk technician paid $26 an hour restores systems using a defined script. Below the $27.63 rate and without design responsibility, the computer exemption does not reach the role.

A contractor engaged through a staffing firm works fixed hours on client equipment under client supervision. Economic reality points to employment, whatever the engagement letter says.

Related terms

Classification touches staffing models more than it touches sourcing strategy. The entries below cover the arrangements where the question arises most often, and where the answer changes the cost base.

FAQ

Does paying a salary make someone exempt?

No. Salary is one of three requirements. Without a qualifying primary duty, a salaried worker is still entitled to overtime.

What is the current salary threshold?

$684 per week for the executive, administrative and professional exemptions, and $107,432 a year for the highly compensated category.

Why do some sources cite a higher figure?

They reflect the 2024 rule, which a federal court vacated nationwide in November 2024. Guidance written between April and November 2024 is out of date.

Does the Act cover offshore staff?

Generally no. The Act applies to work performed in the United States, so a provider’s staff in Manila or Bengaluru fall under local law instead.

How is contractor status decided?

By economic reality: control, investment, permanence, skill and whether the worker’s profit depends on their own managerial decisions.

Can an employee waive overtime?

No.

Compare providers that handle United States employment compliance properly in the Outsource Accelerator directory.

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