Sorting exempt vs non-exempt employees decides one thing above all: who must be paid overtime under the Fair Labor Standards Act (FLSA). The label depends on how much an employee earns, how they are paid, and what they actually do, not on whether the paycheck says “salary” or “hourly.” This guide covers the federal tests as they stand in 2026, the states that set a higher bar, and how overtime is calculated for the employees who qualify.
What Are Exempt and Non-Exempt Employees?
The FLSA sets a federal minimum wage and requires overtime pay for hours worked past 40 in a workweek. Employees covered by those rules are non-exempt. Employees who fall under one of the law’s exemptions, most often the executive, administrative, and professional (EAP) exemptions, are exempt, and their employer owes them no overtime however many hours they work.
Non-exempt is the default. A role is exempt only when the employer can show it passes every part of a specific exemption test, and the burden of proof sits with the employer. That matters in practice: an employee who was wrongly treated as exempt is owed the overtime they should have received, and the Department of Labor (DOL) enforces it.
Exempt vs Non-Exempt Employees: Key Differences
| Factor | Exempt Employees | Non-Exempt Employees |
|---|---|---|
| Overtime pay | Not owed, regardless of hours worked | Owed at 1.5 times the regular rate for hours over 40 in a workweek |
| Federal salary floor | At least $684 per week ($35,568 a year), paid on a salary basis | None; paid hourly or by salary at any level |
| Duties test | Must pass the test for a specific exemption: executive, administrative, professional, computer, or outside sales | Not required |
| Pay basis | Almost always salaried | Usually hourly, sometimes salaried |
| Hours records | Useful for scheduling and project costing, not needed to compute pay | Required: every hour worked drives the paycheck |
Salary alone never settles the question. A salaried employee who earns $684 a week but spends the day on non-exempt work is non-exempt. An hourly worker almost never qualifies for the executive or administrative exemptions, because both require payment on a salary basis.
The Three Tests for Exempt Status
Under DOL Fact Sheet 17A, the executive, administrative, and professional exemptions each require three things, and a role must pass all three.
Salary Basis Test
The employee receives a predetermined amount each pay period that does not go up or down with the quality or quantity of work. Docking an exempt employee’s pay for a partial-day absence or a slow week breaks the salary basis, and an employer with an actual practice of improper deductions can lose the exemption for that employee’s whole job class.
Salary Level Test
The federal minimum is $684 per week, which works out to $35,568 a year. Highly compensated employees have a separate track: total annual compensation of at least $107,432, including at least $684 per week paid as salary, plus a lighter duties test (the employee customarily and regularly performs at least one exempt duty). Computer employees can meet the test on a salary of $684 per week or an hourly rate of at least $27.63.
Duties Test
Each exemption has its own duties test, and the DOL looks at what the person actually does, not the job title.
- Executive: primary duty is managing the enterprise or a recognized department; directs the work of at least 2 full-time employees; has the authority to hire and fire, or real weight in those decisions.
- Administrative: primary duty is office or non-manual work directly related to management or general business operations, exercised with discretion and independent judgment on matters of significance.
- Learned professional: primary duty requires advanced knowledge in a field of science or learning, gained through prolonged specialized instruction (accountants, engineers, nurses with a degree).
- Creative professional: primary duty requires invention, imagination, originality, or talent in a recognized artistic or creative field.
- Computer employee: primary duty is systems analysis, or the design, development, testing, or modification of computer systems or programs. Manufacturing or repairing hardware, or simply relying on computers to do the job, does not qualify.
- Outside sales: primary duty is making sales or obtaining orders, customarily and regularly away from the employer’s place of business. No salary requirement applies.
Two groups are non-exempt no matter how they are paid: manual laborers and other blue-collar workers whose work involves repetitive operations with their hands, physical skill, and energy; and police, firefighters, paramedics, and other first responders, regardless of rank or pay level.
What Happened to the 2024 Threshold Increase
In April 2024 the DOL published a rule raising the salary level to $844 a week on July 1, 2024 and to $1,128 a week ($58,656 a year) on January 1, 2025, with automatic updates every 3 years. On November 15, 2024 the U.S. District Court for the Eastern District of Texas vacated that rule nationwide, and a second Texas court did the same on December 30, 2024. The Fifth Circuit dismissed the appeals on May 5 and 7, 2026, and the DOL restored the 2019 regulatory text effective May 15, 2026. If a payroll vendor or an older article quotes $58,656, it is quoting a threshold that was struck down. The number to apply today is $684 a week.
Who Counts as Non-Exempt?
Anyone who fails any one of the three tests. In practice that covers most hourly staff, salaried employees who earn under $684 a week, and salaried employees above the threshold whose real work is not exempt work: the “office manager” who mostly answers phones and files, the “team lead” with no say over hiring, the “analyst” who follows a script all day. Titles on offer letters carry no weight in a DOL audit.
Salaried non-exempt employees are the group most often mishandled. They still earn overtime; the employer converts the salary to an hourly regular rate (salary divided by the hours it is meant to cover) and pays 1.5 times that rate for hours past 40. Their hours have to be recorded like anyone else’s.
How Overtime Pay Works for Non-Exempt Employees
DOL Fact Sheet 23 sets the federal rules. Non-exempt employees receive at least 1.5 times their regular rate for every hour worked over 40 in a workweek. A workweek is a fixed, regularly recurring period of 168 hours, 7 consecutive 24-hour periods, and the employer chooses when it starts. Averaging hours across 2 or more weeks is not permitted: 30 hours one week and 50 the next means 10 hours of overtime, not zero.
Three things the federal rule does not do: it sets no daily overtime, it requires no premium for weekends or holidays as such, and it puts no cap on the hours an employee aged 16 or older may work in a week. The regular rate is also not always the base wage; nondiscretionary bonuses and shift differentials count toward it.
A worked example. An employee earns $20 an hour and works 45 hours in one workweek:
- Regular pay: 40 hours × $20 = $800
- Overtime rate: $20 × 1.5 = $30
- Overtime pay: 5 hours × $30 = $150
- Total for the week: $950
The overtime calculator runs this for any rate and multiplier, and the post on how to calculate time and a half covers salaried and mixed-rate cases. For the basics of what counts as overtime and whether it can be mandatory, start with what overtime is.
State Rules That Set a Higher Bar
Federal law is the floor. When a state sets a higher salary threshold or a stricter overtime trigger, the employer follows whichever rule favors the employee. Three states diverge from the FLSA far enough to change classifications outright.
California
Exempt executive, administrative, and professional employees must earn at least twice the state minimum wage for full-time work. With the 2026 minimum wage at $16.90 an hour, the floor is $70,304 a year, or $5,858.67 a month. California also reads the duties test more strictly: the employee must be “primarily engaged” in exempt work, meaning more than half of their working time, where federal law asks only about the “primary duty.”
Overtime is daily as well as weekly. Non-exempt employees earn 1.5 times the regular rate after 8 hours in a day and after 40 in a week, and double time after 12 hours in a day. On the 7th consecutive day of a workweek, the first 8 hours pay 1.5 times and everything beyond that pays double.
New York
The salary threshold for the executive and administrative exemptions in 2026 is $1,275 a week ($66,300 a year) in New York City, Nassau, Suffolk, and Westchester counties, and $1,199.10 a week ($62,353.20 a year) in the rest of the state. The thresholds are adjusted every January 1. New York sets no state threshold for the professional exemption, so the federal $684 applies there. Overtime itself follows the federal pattern: 1.5 times the regular rate after 40 hours in a week.
Washington
Washington ties its exempt salary to a multiple of the state minimum wage. In 2026 the multiplier is 2.25 for employers of every size, which at a $17.13 minimum wage means $1,541.70 a week, or $80,168.40 a year, more than double the federal figure. The multiplier steps up to 2.5 by 2028. Overtime is weekly, after 40 hours.
Alaska, Colorado, and Nevada add daily overtime triggers of their own. The full state-by-state table is on the overtime pay laws by state page.
How to Classify an Employee in 5 Steps
- Start with the pay basis. Hourly means non-exempt in nearly every case. Salaried means keep going; a salary is a prerequisite for the main exemptions, not proof of one.
- Check the salary against every floor that applies. Under $684 a week is non-exempt regardless of duties. In California, New York, or Washington, the state number replaces the federal one.
- Match actual duties to one named exemption. Write down what the person does in a typical week and test it against the executive, administrative, professional, computer, or outside sales criteria. A title of “manager” with no direct reports and no hiring authority fails the executive test.
- Audit the salary basis. Look for partial-day docking, deductions for slow periods, or pay that varies with output. Any of these can turn an exempt role non-exempt retroactively.
- Re-check every January. State thresholds move each year. A New York employee paid $65,000 was above the downstate line in 2025 and is below it in 2026 if the salary did not move.
Two mistakes cause most misclassification claims: assuming every salaried employee is exempt, and treating the job title as the duties test. Both are avoidable with the checklist above.
How WebWork Tracks Hours and Overtime for Non-Exempt Employees
Once a role is classified non-exempt, every hour worked becomes a payroll input, and the records need to hold up if the DOL or a state agency asks for them. WebWork handles that chain in one system.
- Track: employees log time on desktop, web, or mobile, so the hours exist as records rather than estimates.
- Separate overtime: the employee overtime hours tracker splits regular from overtime hours automatically. When an employee crosses the set threshold, a pop-up asks them to stop or keep tracking as overtime, and managers can switch the feature on for the whole workspace, one team, or a single person.
- Review and approve: the employee timesheet software builds timesheets from tracked hours, and managers approve them before anything reaches payroll.
- Pay: the employee payroll tracker calculates pay for hourly, fixed, and bonus-based structures. Once timesheets are approved, WebWork generates invoices and sends payments through PayPal, Stripe, Wise, Deel, Gusto, and other connected providers.
The whole flow runs on a 14-day free trial, no credit card required.
Final Thoughts
Exempt vs non-exempt employees comes down to three tests: salary basis, salary level, and duties, and a role has to pass all three to be exempt. The federal floor is $684 a week in 2026, with California, New York, and Washington well above it.
Non-exempt is the safe default when a role is borderline. Paying overtime costs less than repaying it later, and accurate hour records make either case simple to prove.
Frequently Asked Questions
Can a Salaried Employee Be Non-Exempt?
Yes. A salary only meets the salary basis test; the role also has to clear the salary level and the duties test. A salaried employee who earns under $684 a week, or whose main work is not exempt work, is non-exempt and earns overtime at 1.5 times the hourly equivalent of their salary.
Can an Hourly Employee Be Exempt?
Rarely. Computer employees paid at least $27.63 an hour can be exempt, and outside sales employees, teachers, doctors, and lawyers have no salary requirement at all. Outside those groups, hourly pay fails the salary basis test, so the employee is non-exempt.
What Is the Highly Compensated Employee Exemption?
An employee with total annual compensation of at least $107,432, including at least $684 a week paid as salary, is exempt if they customarily and regularly perform at least one duty of an exempt executive, administrative, or professional employee. The full duties test does not apply at that pay level.
Can an Employer Pay an Exempt Employee for Extra Hours?
Yes. The FLSA does not require it, but paying an exempt employee a bonus, a flat sum, or even straight time for extra hours does not break the salary basis, as long as the guaranteed salary of at least $684 a week is still paid.
Do Exempt Employees Need to Track Their Time?
Not for overtime, since none is owed. Many employers still track exempt hours for project costing, client billing, and workload planning, and to hold evidence if a classification is ever challenged.
