Employment classifications can be troubling territory. One wrong move and your business could be hit with major fines or even a lawsuit. Businesses can be subject to federal and state penalties, back wages, and more. But wading through the regulations to evaluate whether an employee should fall under the exempt or nonexempt classification can be confusing, even for the most experienced HR professionals.

Here’s what you need to know to avoid fines and protect your business.

What is the FLSA?

The Fair Labor Standards Act (FLSA) is a federal law that provides many important labor laws and provisions around compensation, child labor, and more.

The FLSA establishes federal minimum wage, overtime pay requirements, employer recordkeeping standards, and youth employment standards affecting employees in the private sector and in Federal, State, and local governments. Covered nonexempt workers are entitled to a minimum wage of at least $7.25 per hour. Many states and cities have higher minimum wages set. Employers should check federal, state, and local laws and provide employees with hourly wages that meet all regulations.

Nonexempt employees are also to receive overtime pay at a rate not less than one and one-half times the regular rate of pay for any time worked beyond 40 hours in a workweek.

Exempt vs. non-exempt

Under the FLSA, workers can either be classified as exempt or nonexempt. How you classify your employees will determine whether they are eligible for overtime.

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