FLSA Exempt vs Non-Exempt Tracking Requirements

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
• Review when job duties change
• Consult legal/HR experts when uncertain

Time Tracking Systems

• Implement for all non-exempt employees
• Consider tracking exempt employees for project management (optional)
• Ensure system captures required data
• Maintain records per FLSA retention requirements

Policy Documentation

• Clear written policies on classification
• Employee acknowledgment of status
• Regular training for managers
• Consistent application across organization

Why Some Companies Track Exempt Hours

Even though not required, some organizations track exempt employee time for:

• Project costing and billing
• Resource allocation
• Performance management
• Identifying overwork and burnout
• Client billing justification