FLSA Classification Review: What to Check Before Year-End
As the year begins to wind down, employers often turn their attention to budgets, performance reviews, compensation planning, and next year's goals.
But there's another area worth reviewing before year-end:
Employee classification.
Specifically, are your employees correctly classified as exempt or nonexempt under the Fair Labor Standards Act (FLSA)?
Classification mistakes can be expensive. They can result in unpaid overtime claims, back wages, penalties, and employee frustration.
The good news is that a classification review doesn't have to be complicated.
September is a great time to take a fresh look at your workforce and make sure your classifications still match the work employees are actually performing.
Why Employee Classification Shouldn't Be a "Set It and Forget It" Decision
An employee's classification may have been correct when they were hired.
But jobs change.
Responsibilities expand. Employees take on new projects. People are promoted. Departments are reorganized. Businesses grow.
A position that was appropriately classified several years ago may need to be reevaluated based on the employee's current duties.
That's why classification reviews should be part of an ongoing HR compliance strategy.
Start With the Job Duties, Not the Job Title
One of the biggest misconceptions about FLSA classification is that an employee's title determines whether they're exempt.
It doesn't.
Titles such as:
Manager
Administrator
Coordinator
Director
Supervisor
don't automatically make someone exempt from overtime.
The actual job duties and applicable salary requirements matter.
That's why employers should review what employees actually do, not simply what their job descriptions or titles say.
Review the Current Role
Start by asking:
What are the employee's primary responsibilities?
How much time do they spend performing different types of work?
Do they exercise independent judgment?
Do they supervise other employees?
Do they have authority or influence over important business decisions?
Has the position changed since the employee was hired?
Compare the answers to the requirements of the applicable FLSA exemption.
If the employee's day-to-day responsibilities have changed significantly, it's time for a closer look.
Don't Forget the Salary Basis Requirements
For many commonly used FLSA exemptions, meeting the applicable salary requirements is part of the analysis.
That means employers should review whether exempt employees are:
Paid on a salary basis as required
Meeting the applicable salary threshold
Receiving compensation in a manner consistent with the exemption
Federal rules can change, and state or local requirements may also impose additional obligations.
Employers should make sure they're evaluating the rules that apply to their workforce rather than relying on an outdated checklist.
Review Employees Who Have Changed Roles
Certain employees deserve extra attention during a classification review.
Look at employees who have:
Been promoted
Taken on management responsibilities
Changed departments
Absorbed responsibilities after a resignation
Moved into newly created positions
Had significant changes to their compensation
Growth can create classification issues when responsibilities evolve faster than HR documentation.
A promotion doesn't automatically make an employee exempt.
A new title doesn't automatically make an employee exempt.
The classification should match the actual role.
Pay Special Attention to "Working Managers"
One common area for employers to review is the working manager.
A manager may supervise employees but also spend a significant amount of time performing the same hands-on work as the employees they supervise.
That doesn't automatically mean the employee is misclassified.
But it does mean the position deserves careful review under the applicable exemption requirements.
The question isn't simply:
"Does this person have employees reporting to them?"
It's:
"Do the employee's actual duties satisfy the requirements of the exemption being used?"
Check Your Timekeeping Practices
Classification and timekeeping go hand in hand.
For nonexempt employees, employers should ensure time is being recorded accurately, including applicable working time outside normal schedules.
Review whether employees are:
Recording all required working time
Working before or after scheduled shifts
Responding to emails or messages outside normal hours
Performing work during unpaid meal periods
Working remotely outside scheduled hours
Technology has made it easier for employees to work from almost anywhere.
It has also made it easier for work time to go unrecorded.
Don't Overlook State and Local Requirements
The FLSA provides federal standards, but employers may also be subject to additional state or local wage and hour requirements.
Depending on where your employees work, those requirements may differ from federal standards.
For example, an employee who satisfies a federal exemption may still need to be evaluated under applicable state requirements.
This is especially important for employers with employees working in multiple states.
When federal, state, or local rules differ, employers need to understand which requirements apply and where the higher standard may control.
What Should You Do If You Find a Problem?
Don't panic and don't simply change someone's classification without understanding the implications.
Instead:
Identify the issue.
Review the employee's actual duties and compensation.
Determine which exemption, if any, applies.
Review applicable federal, state, and local requirements.
Update documentation and payroll practices as appropriate.
Address any historical concerns with appropriate professional guidance.
The goal of a compliance review isn't to find perfection.
It's to identify problems while you still have time to address them.
A Simple FLSA Classification Review Checklist
Before year-end, consider reviewing:
✔ Exempt and nonexempt classifications
✔ Current job descriptions
✔ Actual job duties
✔ Salary basis and applicable salary thresholds
✔ Recent promotions and role changes
✔ Working manager positions
✔ Timekeeping practices
✔ Overtime practices
✔ Remote and after-hours work
✔ State and local wage requirements
A focused review now can prevent a much more complicated problem later.
Why September Is the Right Time
September gives employers several months before year-end to identify and address potential issues.
It's also a natural time to review roles because many organizations are already beginning conversations around:
2027 budgets
Compensation
Promotions
Organizational structure
Workforce planning
If you're changing roles or compensation for next year, classification should be part of that conversation.
Don't wait until the new year to discover that your organizational structure and your HR records don't match.
Employee classification isn't just an HR administrative task.
It affects payroll, budgeting, employee expectations, compliance, and business risk.
As you prepare for the final months of the year, take the opportunity to ask:
Do our classifications still reflect the work our employees are actually doing?
If the answer isn't clear, that's a good reason to take a closer look.
People Solutions Hub helps growing businesses review their HR practices, strengthen compliance, and create people systems that support the way their organizations actually operate.
Because compliance isn't about checking a box once.
It's about making sure your people practices keep up with your business.
Contact People Solutions Hub to learn more or schedule a conversation.
About People Solutions Hub
People Solutions Hub was founded by Nicki Leritz, an HR leader committed to giving small and mid-sized businesses clear, practical, and compliant people operations. After years of watching employers struggle with shifting laws, confusing deadlines, and inconsistent HR support, Nicki built PSH to bridge the gap between what teams need and what real-world businesses can actually manage. Today, our team helps Minnesota employers navigate everything from PFML compliance, employee handbooks, and HR audits to pay transparency, wage notices,
and leave management.
We believe HR shouldn’t feel overwhelming, it should feel supportive and built for long-term stability.
At People Solutions Hub, we partner with business owners, managers, and growing teams to simplify compliance, strengthen workplace culture, and build people systems that actually work.
📩 Reach out at info@peoplesolutionshub.co
🌐 Visit www.peoplesolutionshub.co
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