Misclassifying employees can torch your payroll budget and pull you into a compliance mess. You can’t just decide who gets overtime based on what feels fair or who has a desk job. The Fair Labor Standards Act (FLSA) sets the rules, and those rules come with financial consequences. This isn’t a paperwork problem. It’s a business liability with a timecard.
Who Gets Overtime and Why
Non-exempt workers are legally entitled to overtime pay. If they work more than 40 hours in a workweek, you owe them time-and-a-half. It doesn’t matter if they agreed to a flat rate or love the hustle; federal law overrides private deals. Exempt workers, on the other hand, don’t receive overtime. Their compensation stays the same regardless of hours worked. That’s because their roles meet certain duty tests and salary thresholds.
Salary Isn’t the Only Test
Exempt status hinges on two points: salary and job duties. To qualify as exempt, the employee must earn at least $684 per week (2025 figure) and perform specific types of work. These jobs usually fall into executive, administrative, or professional categories. Managing teams, using independent judgment, or having advanced knowledge from specialized education are common traits.
Non-exempt workers can be salaried too. But if their duties don’t meet exemption standards, they’re still entitled to overtime. You can’t substitute a paycheck format for regulatory compliance.
Who Tracks Time (and Why You Should Care)
Timekeeping is not optional for non-exempt roles. Employers must document the exact hours worked and compensate accordingly. Missing timesheets, guesswork, or retroactive log-ins invite wage claims. When those disputes hit court, the burden of proof lands on the employer.
Exempt employees are not required by law to track hours, but it’s smart to keep internal tabs for project budgets or resource planning. Just because timekeeping isn’t mandated doesn’t mean it’s irrelevant.
Breaks and the Clock
Federal law doesn’t force companies to offer breaks. But if breaks under 20 minutes are given to non-exempt employees, they must be paid. Off-the-clock lunch? That only counts if the employee is fully relieved of duties. If they answer phones or emails during “lunch,” it’s work and it’s paid.
Exempt employees don’t get the same protections. Meal periods and breaks for them are typically baked into internal policies rather than driven by law.
The Errors Employers Repeat
The most common payroll problem: misclassifying non-exempt employees as exempt. It often starts with confusion around job titles. A manager title doesn’t mean someone meets the executive exemption. What matters is the actual job function. Overlooking this leads to unpaid overtime and lawsuits.
Other recurring issues include skipping time records for hourly staff or assuming that salaried employees are exempt by default. FLSA doesn’t care about job labels or office culture. It follows the function and compensation structure every time.
What Employers Should Actually Do
Start with a job duties audit. Review each position against the FLSA exemption criteria and the salary. Don’t rely on industry norms or what competitors do. Make sure each role’s description matches its actual duties.
Next, evaluate your pay structure. A salary above the threshold is only one piece. The job must still pass a duties test. And those tests shift if federal guidelines change, which they often do. Staying informed is not optional.
Lastly, train your supervisors. Timekeeping and overtime enforcement aren’t HR-only responsibilities. Anyone managing schedules or approving time off must understand how missteps affect compliance.
Pence Law Firm, P.C. can help you audit your classifications and tighten your wage and hour practices. For guidance backed by law, not guesswork, call (918) 367-8505.
