Employee Classification Audits: Reviewing Exempt vs. Non-Exempt Determinations

Employee classification under the Fair Labor Standards Act represents one of the most significant compliance challenges facing American employers, with misclassification creating substantial legal and financial exposure affecting millions of workers across all industries. The fundamental distinction between exempt employees—who receive salary regardless of hours worked and are not entitled to overtime compensation—and non-exempt employees—who must receive overtime at 1.5 times their regular rate for hours exceeding 40 per week—determines billions of dollars in annual wage obligations and shapes workforce management practices throughout the economy. With the Department of Labor recovering over $274 million in back wages for more than 190,000 workers annually through wage and hour investigations, and class action FLSA litigation generating settlements routinely exceeding $10-50 million for Fortune 500 companies, proper classification represents critical risk management rather than administrative formality.