Exempt vs Non-Exempt

The three tests for exemption

Under the FLSA, every employee is non-exempt by default. To treat someone as exempt from overtime, most exemptions require the employer to meet all three tests:

1. Salary basis. The employee gets a predetermined, fixed salary each pay period that is not reduced because of the quality or quantity of work.
2. Salary level. The salary is at or above the threshold. As of late 2026, the federal threshold enforced by the Department of Labor is $684 a week ($35,568 a year). A 2024 rule that would have raised it was vacated by a federal court in Texas in November 2024. Employers can count non-discretionary bonuses and incentive payments, paid at least annually, toward up to 10% of the threshold.
3. Duties. The employee's primary duty fits one of the exemption categories.

Salary alone never makes someone exempt. Paying a call center agent $50,000 a year does not remove their right to overtime if their primary duty is handling customer calls.

The main exemption categories

• Executive. Primary duty is managing the enterprise or a recognized department or subdivision; customarily and regularly directs the work of two or more full-time employees (or the equivalent); and has authority to hire or fire, or their recommendations on hiring, firing and promotion carry particular weight.
• Administrative. Primary duty is office or non-manual work directly related to the management or general business operations of the employer or its customers, and includes the exercise of discretion and independent judgment on matters of significance.
• Learned professional. Primary duty requires advanced knowledge in a field of science or learning, usually acquired through a prolonged course of specialized instruction. Think lawyers, accountants, registered nurses paid on a salary basis, engineers.
• Creative professional. Work requiring invention, imagination or talent in a recognized artistic or creative field.
• Computer employee. Systems analysts, programmers and software engineers. They can be paid either on a salary basis at the standard threshold or at least $27.63 an hour.
• Outside sales. Primary duty is making sales or obtaining orders away from the employer's place of business. No salary test applies.
• Highly compensated employee (HCE). Earning at least $107,432 a year under the enforced 2019 rule, with at least the standard weekly amount paid on a salary basis, and customarily performing at least one exempt duty.

Teachers, doctors and lawyers are exempt without a salary test.

Real examples from hiring and operations teams

Classification gets hard in the middle of the org chart. A few roles we see misclassified often:

• Contact center team leads. If a team lead spends most of the day taking escalated calls and only coaches between them, the primary duty may not be management. When the role is mostly floor support with no real input on hiring or firing, it usually belongs on the non-exempt side.
• Recruiters. A full-cycle corporate recruiter who advises hiring managers, sets sourcing strategy and makes judgment calls on candidates commonly fits the administrative exemption. A high-volume screener who runs candidates through a fixed checklist and schedules interviews often does not, because following set criteria is not discretion and independent judgment.
• HR coordinators and assistants. Processing paperwork, onboarding documents and data entry is generally non-exempt work, whatever the title says.
• Workforce management analysts. Building forecasts and making scheduling recommendations that shape operations can be administrative. Pulling reports and adjusting schedules to a template usually is not.
• Trainers. A trainer who designs curriculum and assesses readiness can be exempt; one who delivers a fixed script may not be.

The question is always what the person does most of the time and how much real judgment it takes, not the job title or what the job description claims.

State salary thresholds and rules

Several states set much higher salary thresholds or stricter duties tests. California requires exempt employees to earn at least twice the state minimum wage for full-time work, which comes to $70,304 a year in 2026 based on the $16.90 state minimum wage, and requires more than half of working time to be spent on exempt duties. Washington sets its threshold as a multiple of the state minimum wage, and New York, Colorado and Alaska also exceed the federal level. Some states also set their own thresholds for computer professionals.

For multi-state and remote teams, check the threshold where the employee actually works, not where the company is headquartered. A remote recruiter in Seattle and one in Atlanta in the same job can have different exempt status.

How salaried non-exempt and docking work

Salaried and exempt are not the same thing. An employer can pay a non-exempt employee a salary, but must still track hours and pay overtime on top of it.

For exempt employees, the salary basis rule limits deductions. Allowed deductions include full-day absences for personal reasons or sickness under a bona fide plan, unpaid disciplinary suspensions of full days for workplace conduct violations, the first or last week of employment worked partially, and unpaid FMLA leave. Partial-day deductions for an exempt employee who leaves two hours early are generally not allowed. An actual practice of improper deductions can cost the exemption for everyone in the same job under the same manager. The DOL's safe harbor protects employers that have a clearly communicated policy against improper deductions, a complaint mechanism, and reimburse any mistakes.

Common misclassification mistakes

• Treating everyone on salary as exempt.
• Using job titles like manager or specialist to justify the exemption.
• Not reviewing roles when the work changes, such as when a supervisor role shrinks into mostly floor work after a reorg.
• Missing a state threshold increase on January 1.
• Docking exempt employees for partial days.
• Confusing exempt status with worker classification as an employee or contractor. A contractor is not covered by the FLSA at all; an exempt employee is covered but not owed overtime.

Misclassification claims can reach back two to three years under federal law and longer under some state laws, with doubled damages. Review exempt roles at least once a year, and get legal review for any role that is close to the line.