Classifying Workers Correctly

A Practical Guide

One of the biggest headaches for ministry or business HR is determining whether employees are exempt or not. Exempt employees can work more than 40 hours a week without overtime, don't have to keep track of hours, and generally can be more flexible. Under the Fair Labor Standards Act (FLSA), non-exempt employees must receive at least minimum wage (federal and state) and must be paid overtime if they meet the federal or state overtime standards.

Employees are not exempt unless they meet the definitions for exempt employees. Job titles are not relevant, but actual job duties, pay level, and source of pay can affect the analysis. 

The Main Federal Exemptions

The first category of exemption can be called EAP for short—Executive, Administrative, and Professional. To be EAP-exempt, someone must meet all three of these factors:

1. They are paid a fixed salary that is not docked for poor quality work or short days.
2. The salary level must be at least $648 a week (currently for the federal enforcement level, and states may be higher). For Highly Compensated Employees (HCE), the compensation must be $107,432. As of August 2025, Department of Labor (DOL) is currently enforcing 2019 level while litigation continues.
3. They must meet their respective "duties" tests.

Another category is computer programmers, systems analysts, and software engineers.

Yet another category is outside sales.

And for ministries, ministers likely are exempt.

Blue-collar workers who work with their hands are not exempt no matter how highly paid they are.

Community service providers such as police officers and fire fighters are not exempt.

Executive Employee Exemption

The executive employee must meet the compensation test described above. The employee must manage the enterprise or a department, supervising the work of at least two or more other fulltime employees. The employee must have the authority to hire and fire or at least have significant input into decisions.

Administrative Exemption

The administrative employee must meet the compensation test. The duties must be the performance of office (non-manual) work directly related to management or general business operations. There must be exercise of discretion and independent judgment—in other words, not just an administrative assistant.

Professional Exemption

The learned professional employee must meet the compensation test. The primary duty must be the performance of work that is intellectual, requires advanced knowledge, and consistent exercise of discretion and judgment. Usually, advanced education is required. But this doesn't apply to all learned professionals—not teachers, doctors, and lawyers.

Creative Professional Exemption

The employee must meet the compensation test. The primary duty is performing work requiring invention, imagination or other creative talent.

Computer Professional Exemption

The employee must be compensated in either salary or fees at the $684 a week compensation test (or at least $27.63 an hour). The employee must be a computer systems analyst, computer programmer, software engineer, or skilled worker. The duties are high level—designing, consulting, creating, testing, and modifying programs.

Outside Sales Exemption

The outside sales employee must be engaged away from the regular place of business and have the duty of making sales. There is no compensation test.

Highly Compensated Employees (HCE)

Highly compensated employees must perform office (non-manual) work and be paid at least $107,432 a year. Duties include at least one of the duties of the other EAP employees.

Ministers

While the statute does not say so, the Department of Labor takes the position that the ministerial claim bars FLSA wage-and-hour claims. This makes sense under the church autonomy doctrine, because courts are not allowed to speak into the hiring, firing, or duties of ministers. It would be a contradiction in terms if courts could say how many hours they could work or what they should be paid. The key challenges for ministerial exception are often defining who are ministers.

Mini-Guide for Colorado

Colorado's minimum wage in 2025 was $14.81 an hour.

Colorado's salary thresholds for 2025 are $1086.25/week for EAP and $127,091 for HCE. Computer professionals must meet the hourly rate of $34.07.

Overtime is required after 40 hours/week, 12 hours/day, or 12 consecutive hours—whichever yields more overtime.

A 30-minute meal break must happen for shifts over five consecutive hours and can be unpaid if there are no duties during the break.

Ten minutes rest must be paid for every four hours of work or major fraction thereof.

Common Real-Life Misclassifications and Misconceptions

An assistant manager meets the pay criteria and has the title of manager but spends about 85% of her time on front-line tasks. Does she meet the executive exemption? Probably not, because her primary duty is not managing and directing the work of others.

An office manager/administrator meets the pay criteria, has a management title, follows set procedures, and does not have much discretion as to his tasks. Despite his job description, he does not have enough independent judgment and management decision to qualify.

A project manager is in a production role executing, but not setting policy, and meets the pay criteria. She may meet the administrative test, though probably not the executive one. The key will be whether her work could be called running the business or just running a service that the business provided.

An IT-Help Desk employee meets the pay criteria and works solely with computers. Still, this position will not be exempt because it doesn't involve the level of original work required to meet the computer professional exemption.
A sales employee works by phone and email, but from within the office. Since this is not outside sales, he is not exempt.

A math teacher at a Christian school is responsible to lead prayer and faith formation. Is she exempt? She may well be, after going through a fact-specific analysis for the ministerial exception.

Your CEO explains that people who are paid above the salary minimum are all exempt. Unfortunately, she is wrong—the duties still mut fit an exemption.
Your HR Department is arguing about whether bonuses can count towards the salary level. The answer is both yes and no. The DOL says that bonuses and incentive payments (including commissions) can count for up to 10% of the standard salary level, but only if they are nondiscretionary (i.e. they are earned and must be paid).

Your law firm pays junior associates lower than the salary minimum. They are not exempt, right? No, teachers, doctors, and lawyers do not have any salary test. They are still exempt. (Whether you can get a teacher, doctor, or lawyer for $35,000 a year, and whether it would be right to pay that little, may be another question.)

What Happens if You Get the Classification Wrong?

If an employee is misclassified and someone files a complaint alleging that the employee was not paid overtime or has unpaid minimum wages, the employer can face significant penalties. The employer can owe back wages. The employer can owe an equal amount in liquidated damages unless the employer can show good faith and reasonableness. Civil penalties may increase the payment. In a lawsuit, the plaintiff may win attorney fees.

The statute of limitations is usually two years, though it can be three years if actions are willful. And if the violation was willful, there can even be criminal penalties.

Different states may provide for other penalties.

Steps to Working on Correct Classifications

Here are some steps that can be helpful in evaluating classifications.

1. Map roles to exemptions. Which exemption, if any, would apply? If there is no clean fit, it's best to go with non-exempt.
2. Check salary basis and level to make sure you meet minimums.
3. Evaluate roles based on actual duties, not job title. Interview employees about their actual work, if needed.
4. Confirm state law. Make sure that you meet state thresholds and rules.
5. Tighten timekeeping and policies. Track hours carefully for non-exempt staff and require their cooperation. Train supervisors on overtime rules, and fix anything out of order. Remember, you can discipline someone for taking overtime without permission and against your rules—but you still have to pay the overtime.
6. For ministries: Evaluate ministerial roles separately.

When to Call Legal Counsel

Often, HR professionals are experienced at walking through classifications. When they are less experienced, or in complicated situations, it may be wise to call legal counsel. Here are some possible situations where it might be advisable.

1. Evaluating gray areas where the worker has hybrid roles or the work situation is complex.
2. Re-classifying workers and evaluating the need for back pay. These projects can be complex and should be handled carefully.
3. Evaluating the ministerial exception. This evaluation must meet constitutional standards and is fact-intensive and high-stakes.

Featured Image by Rebecca Sidebotham.