DOL Affirms Employer Discretion To Classify Learned Professionals as Nonexempt

On January 5, 2026, the U.S. Department of Labor’s Wage and Hour Division (DOL) issued Opinion Letter FLSA2026-1, addressing whether a licensed clinical social worker (LCSW) may be treated as nonexempt following an internal restructuring that discontinued supervisory duties and shifted compensation from salary to hourly pay. 

Background

The letter responds to a query from an LCSW whose employer sought to reclassify their position from “salary (exempt)” to “hourly (non-exempt).” The employer stated that this change was necessary because the role will no longer have a supervisory component. 

The Fair Labor Standards Act (FLSA) requires at least the federal minimum wage for all hours worked and overtime of at least 1.5 times the regular rate for all hours over 40 in a workweek, establishing a federal floor that employers may exceed. Section 13(a)(1) of the FLSA exempts bona fide executive, administrative, and professional employees based on the learned professional exemption defined by 29 C.F.R. § 541.301’s advanced‑knowledge, field of science or learning, and specialized academic instruction elements, as well as separate compensation criteria. To satisfy the learned professional exemption, an employer must pay an employee at or above the regulatory threshold (referenced above) on a “salary basis,” defined at 29 C.F.R. § 541.602, a “fee basis,” defined at 29 C.F.R. § 541.605, or a time-based rate that includes a minimum guarantee that bears a reasonable relationship (e.g., a ratio of 1.5-to-1 or less) to the employee’s usual time-based earnings. See 29 C.F.R. § 541.604(b).

In the opinion letter, DOL considered whether the employee performed duties triggering application of the learned professional exemption, whether the employer’s change to hourly pay resulted in the employee retaining the exemption, and whether the employer had the discretion to change the employee from an exempt employee to a nonexempt employee. 

Duties 

DOL began the analysis by considering whether the employee met the FLSA’s legal test for learned professionals. The exemption applies where the employee’s primary duty includes work requiring “advanced knowledge” in a “field of science or learning,” consistent with 29 C.F.R. § 541.301. Relying on a previous determination that LCSW positions’ core duties include conducting clinical assessments, planning treatment, and participating in interdisciplinary care teams, DOL determined that sufficient facts supported the duties portion of the exemption.

Compensation Method

Nonetheless, DOL considered whether the employee’s salary structure satisfied the compensation element of the exemption. The learned professional exemption generally requires payment on a salary basis at or above the applicable salary level, or a qualifying fee basis or time‑based rate with a reasonable‑relationship guarantee under 29 C.F.R. § 541.604(b). On this second question, DOL determined that the employee’s move to an hourly pay structure from a salary structure defeated application of the exemption. 

Employer Discretion

DOL considered the novel question of the employee’s desire to be qualified as an exempt employee. Often, employees hoping for overtime pay or other protections afforded to nonexempt employees seek to be classified as nonexempt. And improper classification of employees as nonexempt triggers significant liability risks for employers. Here, considering whether the employer could classify the employee as nonexempt, DOL determined that employers have the discretion to classify employees as nonexempt even when an exemption could apply, provided they comply with minimum wage, overtime, and recordkeeping requirements for nonexempt employees. According to DOL, the FLSA sets minimum wage and overtime floors; it does not compel employers to claim an exemption. Further, an employer may opt for permissible alternatives, such as a fee basis or a time‑based rate with a reasonable guarantee that bears a reasonable relationship to usual earnings.

What This Means for Employers

DOL provided further clarification regarding the scope of the learned professional exemption and the interplay between the duties and salary structure requirements. Further, DOL made clear that employers are not required to classify employees as exempt if they meet the tests under the FLSA.

Employers of licensed professionals—such as social workers, nurses, therapists, and other advanced‑degree clinicians—should ensure employees in those roles are properly classified in terms of meeting the duties test. Further, employers should ensure that they are not risking the exemption by inadvertently paying employees on an hourly basis. Also, in the event that an employee seeks to be classified as exempt, employers are not required to do so and may decide to keep the employee’s status as nonexempt.

Practical Tips for Employers

• Review roles occupied by licensed, graduate‑educated professionals to confirm both duties and compensation satisfy exemption criteria.
• Align compensation with the salary basis, fee basis, or reasonable‑relationship structure set out in 29 C.F.R. Part 541.
• If reclassifying an employee as nonexempt, be sure to confirm accurate capture of all hours worked and correct overtime payment in the transition week and the weeks that follow.