Exempt or Nonexempt?
FLSA Classification Case Study Guide
This guide walks you through how to approach the HRM 305 case study on FLSA employee classification — covering the three-part exemption test, the duties tests that matter most, how to apply them to Jane Swift’s situation at Jones Department Store, and what a graduate-level case study response actually looks like.
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Get Expert Writing Help →What the FLSA Actually Says About Overtime Exemptions
The Fair Labor Standards Act of 1938 (FLSA) establishes federal minimum wage and overtime requirements in the United States. Under the FLSA, nonexempt employees must receive overtime pay at a rate of at least 1.5 times their regular rate for every hour worked beyond 40 in a workweek. Exempt employees — those who qualify under specific white-collar exemption categories — are not entitled to overtime pay regardless of how many hours they work. Misclassifying a nonexempt employee as exempt is an FLSA violation that exposes employers to back-pay liability, civil penalties, and litigation.
Jane Swift’s situation at Jones Department Store gets at one of the most litigated questions in employment law: when does a worker’s job title actually match the legal standard for exemption? Amy Kostner called shift leaders “management” and classified them as exempt. That might be the end of the story — or it might be a liability waiting to happen. The FLSA doesn’t care about job titles. It cares about what employees actually do, how much they’re paid, and how they’re paid.
Martocchio’s Strategic Compensation (11th ed., 2025) frames this issue in terms of total compensation design: how employers structure pay and classification decisions has direct implications for cost control, legal compliance, and employee relations. Amy’s classification decision wasn’t just a legal judgment — it was a compensation management decision with real consequences for Jane and for Jones Department Store.
FLSA Enacted 1938
The foundational federal wage-and-hour law. Amendments over decades have updated salary thresholds but the core exemption framework remains recognizable.
White-Collar Exemptions
The Executive, Administrative, and Professional exemptions are the three primary white-collar exemptions relevant to management-adjacent roles like Jane’s.
Job Title Irrelevant
The FLSA exemptions are determined by actual job duties and compensation structure — not by what the employer chooses to call the position.
Current Salary Threshold
As of 2025, the DOL’s salary threshold for most white-collar exemptions stands at $684/week ($35,568/year). Employees paid below this threshold cannot be exempt regardless of duties.
The Three-Part Exemption Test: All Three Must Be Met
To classify an employee as exempt under a white-collar exemption, an employer must satisfy three distinct tests simultaneously. Failing even one test means the employee is nonexempt and entitled to overtime. This is where a lot of employers go wrong — they focus on one element (usually the job duties) while missing the others.
For the case study, your analysis needs to address all three tests, not just the duties question. The case gives you limited information about Jane’s pay structure, but it tells you enough to raise questions worth exploring — and “raising questions” is exactly what good case study analysis does at the graduate level.
The DOL’s Position on Exemption Tests
The U.S. Department of Labor’s Wage and Hour Division administers and enforces the FLSA. Their regulations at 29 CFR Part 541 lay out the full criteria for each exemption category. The DOL also provides a Fact Sheet (#17A through #17N) series that breaks down exemption criteria by category in plain language. These are legitimate, citable sources for your case study — and using them signals that you went to primary sources, not just the textbook.
The White-Collar Duties Tests: What Each Exemption Actually Requires
The duties test is where most of the analytical work in this case study lives. Two exemptions are plausible candidates for Jane’s role: the Executive exemption and the Administrative exemption. Understanding both — in detail — is necessary before you can argue whether the classification was appropriate.
- Must customarily and regularly direct the work of two or more other employees
- Must have the authority to hire or fire — or whose recommendations as to hiring, firing, advancement, or other status changes are given particular weight
- Must be compensated on a salary basis at not less than $684/week
- Primary duty must include the exercise of discretion and independent judgment with respect to matters of significance
- Must be compensated on a salary or fee basis at not less than $684/week
The “Primary Duty” Question — And Why It’s the Heart of This Case
Under the FLSA regulations, “primary duty” means the principal, main, major, or most important duty. Courts and the DOL look at the amount of time spent on exempt vs. nonexempt work as one factor — but it’s not the only one. The regulations note that employees who spend more than 50% of their time on exempt work generally satisfy the primary duty requirement. They also note that time alone is not the definitive test.
Jane’s own statement is significant here: she says she typically spends more than half her time performing associate duties — cashiering, assisting customers. That’s the kind of factual detail that drives exemption analysis. If Jane is predominantly doing hourly associate work, the argument that her primary duty is management becomes hard to sustain.
The “Concurrent Work” Problem for Executive Exemptions
The FLSA regulations at 29 CFR § 541.106 specifically address managers who perform nonexempt work simultaneously with supervising employees — a situation called “concurrent work.” A manager who supervises while also stocking shelves or cashiering can still qualify for the executive exemption. But when a shift leader primarily cashiers and only incidentally supervises? That’s a harder case. The regulations emphasize that the employee’s supervisory duties must remain the primary duty even when performing manual work alongside subordinates.
| Factor | Points Toward Exempt | Points Toward Nonexempt |
|---|---|---|
| Time on exempt duties | More than 50% of time on management tasks | Jane says she spends more than half her time on associate duties |
| Supervision of others | Assigns associates to work areas, sits in on interviews | The daily schedule is set by an assistant manager, not Jane |
| Hire/fire authority | Aware of terminations before they happen; gives performance feedback | No direct hiring or firing authority specified in the case |
| Discretion and independent judgment | Reviews transactions, initials returns, resolves pricing disputes | Returns over $50 require assistant manager or store manager approval |
| Salary basis | Paid a higher rate than most associates | Paid less than assistant managers; no information on salary vs. hourly pay structure |
Why Amy Classified Shift Leaders as Exempt — And What Jones Department Store Gets Out of It
Question 2-6
Why did Amy classify the shift leaders as exempt? Are there any advantages to Jones Department Store to having the shift leaders classified as exempt?
Your answer to this question needs to work on two levels: the legal reasoning Amy likely used, and the business rationale behind it.
On the legal reasoning: Amy’s argument is that shift leaders are part of “the management team.” Under the executive exemption, an employee who directs the work of two or more people and has some influence over employment decisions can potentially qualify. Jane does assign associates to work areas, sits in on interviews, gives feedback that informs performance appraisals, and exercises floor-level judgment. These are the building blocks Amy used to justify the classification.
On the business advantages: This is where your Martocchio textbook comes in. Think through what exempt classification means for the employer’s compensation costs:
- No overtime pay obligation regardless of hours worked — in a retail environment where coverage fluctuates, this is significant
- Simpler payroll administration — no hourly tracking for overtime calculation purposes
- Flexibility to schedule shifts of varying lengths without triggering overtime liability
- Reduced labor cost during high-volume periods (like the staffing shortage the case describes)
Note the tension: these advantages are real, but they only exist if the classification is legally defensible. If shift leaders are misclassified, the “savings” become back-pay liability plus penalties.
Are the Shift Leaders Properly Classified as Exempt? Making the Argument Either Way
Question 2-7
Do you think that the shift leaders are properly classified as exempt? Why or why not?
This is the analytical core of the case. Graduate-level case study responses don’t just pick a side — they acknowledge the complexity, walk through both arguments, and then take a reasoned position supported by the legal criteria and case facts.
The argument for exempt status: Jane does exercise some management authority. She directs associates during her shift, she has some approval authority (under $50 returns, pricing disputes), she participates in employment decisions at an advisory level, and she has a title and pay rate that distinguishes her from the regular associate pool. Under the executive exemption’s “concurrent work” provision, performing nonexempt work alongside supervisory duties doesn’t automatically disqualify someone.
The argument against exempt status: This is the stronger argument given the case facts. The key points to develop:
- Jane herself estimates she spends more than half her time on associate duties — cashiering, customer assistance. That’s a significant indicator that management is not her primary duty.
- Her discretion is limited. Returns over $50 go to the assistant manager. The daily schedule is set by the assistant manager, not Jane. Real managerial authority involves making decisions, not flagging things for someone else to decide.
- Her influence over employment decisions is advisory, not determinative. Giving feedback that goes into a performance appraisal is not the same as having particular weight in hiring/firing decisions.
- The case does not confirm she meets the salary basis and salary level tests — if she’s paid hourly, she likely fails the salary basis test entirely, which ends the exemption analysis immediately.
A well-constructed graduate response will land on a position: most likely that the classification is questionable at best, and that Jane has a plausible claim to nonexempt status that Jones Department Store should take seriously.
The FLSA exemptions are construed narrowly against the employer seeking to assert them. When in doubt, the employee is nonexempt.
— U.S. Department of Labor, Wage and Hour Division interpretive guidanceFactors Amy Should Actually Be Analyzing Before Making This Call
Question 2-8
What are some factors that Amy should consider when determining whether shift leaders are exempt or nonexempt?
This question asks you to think like an HR professional doing a proper classification analysis. Structure your answer around the three-part test and expand on each factor systematically.
Verify the Pay Structure First
Before analyzing duties, confirm whether shift leaders are paid on a salary or hourly basis, and whether that salary meets the $684/week threshold. If they’re paid hourly, the exemption fails before you ever get to duties. This seems basic but it’s the first error many employers make — they go straight to duties without confirming the salary tests are met.
Conduct a Real Job Analysis — Not a Job Title Review
Amy needs actual data on what shift leaders do with their time. This means time-study analysis, job duty inventories, and direct observation — not just reading the job description or asking what the person’s title is. Jane’s self-report that she spends more than half her time on nonexempt tasks is the kind of data point that needs formal documentation.
Map Actual Duties Against the Specific Exemption Criteria
For the executive exemption specifically: Does Jane customarily and regularly direct two or more employees? Are her recommendations on hiring and firing actually given particular weight by decision-makers — meaning do they follow her recommendations? Or does she just observe and report? These are fact-specific questions that require honest answers, not aspirational job descriptions.
Assess the Real Level of Discretion and Independent Judgment
The FLSA regulations define “discretion and independent judgment” as involving comparison and evaluation of possible courses of conduct and acting or making a decision after considering the various possibilities. Approval of returns under $50 is procedural compliance, not independent judgment. Amy should ask: what decisions can Jane actually make unilaterally, without escalating to a superior?
Consider the Legal Risk of Getting This Wrong
FLSA misclassification exposes Jones Department Store to back-pay liability (up to two years of unpaid overtime, or three years if the violation is willful), liquidated damages equal to the back-pay amount, and attorney’s fees. If all shift leaders are misclassified and have been working 45–50 hour weeks, the aggregate liability grows fast. Amy should weigh the short-term labor cost savings against this exposure — and involve legal counsel in the classification decision.
How to Structure a Graduate-Level Case Study Response for HRM 305
The case study format for HRM 305 is different from a standard essay. You’re not writing a literature review or a research paper. You’re applying legal and compensation management frameworks to specific facts, taking positions, and supporting them with evidence. Here’s what the structure should look like.
| Section | What Goes Here | Common Mistake |
|---|---|---|
| Cover Page | Your name, course number (HRM 305), assignment title, institution, date. Yes — your name. Per the course instructions. | Skipping the cover page or submitting without your name |
| Introduction | Brief framing of the case and the legal question being analyzed. One paragraph. | Writing a long summary of the case facts the professor already knows |
| Legal Framework | The FLSA exemption criteria relevant to this case — salary basis, salary level, and the applicable duties tests. Cite the CFR and/or DOL sources here. | Describing the FLSA in general terms without connecting it to the specific exemption categories |
| Case Analysis (Q by Q) | Address each question with specific reference to case facts and legal criteria. Take positions. Support them. | Describing the facts without analyzing them; hedging on every question without a conclusion |
| Conclusion | Summary of your key findings and recommendations for Amy/Jones Department Store. What should they do next? | Trailing off without a recommendation |
| References / Bibliography | Martocchio textbook, FLSA statute or CFR, DOL Fact Sheets, any additional scholarly or legal sources. APA format unless specified otherwise. | Citing only the textbook; using informal web sources without DOL or legal database backing |
What Makes a Graduate-Level Case Study Response Stand Out
- Primary source citations: Cite 29 CFR Part 541 directly, not just the textbook’s summary of it. DOL Fact Sheet #17A is also a clean, citable source.
- Specific facts, specific criteria: Don’t say “Jane may not be a true manager.” Say “Jane’s statement that she spends more than 50% of her time on nonexempt tasks is directly relevant to the primary duty analysis under 29 CFR § 541.700.”
- A real position on Question 2-7: Graduate responses take a stance. Saying “it could go either way” without resolution is a dodge, not analysis.
- Martocchio integration: Connect the classification decision to the compensation management concepts in the textbook — cost control, equity, legal compliance as components of strategic compensation design.
- Recommendation for Amy: End with something actionable. What should Jones Department Store do to reduce their legal exposure?
Graduate Writing Standards: What “Graduate-Level” Means for This Assignment
The course instructions are explicit: this is a graduate-level assignment. That phrase carries specific expectations that go beyond just “write more carefully.” Here’s what it means in practice for this case study.
What Graduate Writing Looks Like
- Arguments are built from specific legal criteria applied to specific case facts — not general impressions
- Sources are cited properly (APA format); direct quotes and paraphrased concepts both get citations
- Analysis goes beyond description — you explain why facts matter, not just what they are
- You engage with counterarguments and address them — not just state the side you agree with
- The writing is clear, precise, and professional — no casual or conversational phrasing
- Cover page, references, and proper document formatting are non-negotiable components
- You use course concepts (from Martocchio) to frame the business context of legal decisions
What Will Cost You Points
- Describing the case facts back to the professor without adding analytical value
- Saying “the FLSA says employers must pay overtime” without engaging with the exemption criteria
- Using websites like Chron.com or HR-related blogs as primary legal sources
- Answering only one or two questions and glossing over the others
- Submitting without a cover page, references section, or your name on the document
- Failing to take a position on Question 2-7 — vagueness is not nuance
- Using the textbook as your only source when DOL primary sources are freely available
Verified External Source: DOL Wage and Hour Division
The U.S. Department of Labor’s Wage and Hour Division publishes the definitive guidance on FLSA exemption criteria. For this case study, the most directly relevant resources are DOL Fact Sheet #17A (General Exemption Information) and Fact Sheet #17B (Executive Exemption). These are freely available at dol.gov/agencies/whd/fact-sheets. For the regulatory text, 29 CFR Part 541 is the authoritative source. Citing these alongside Martocchio shows you can navigate primary legal sources — a skill that matters in HR practice, not just in class.