Short answer: non-exempt employees are covered by the FLSA’s minimum wage and overtime rules and must get time and a half for hours worked over 40 in a workweek. Exempt employees are not owed overtime, but only if they meet all three federal tests: they are paid on a salary basis, the salary is at least $684 per week, and their primary duties fit an exemption. As of late 2026, $684 per week is the federal standard salary level; the 2024 increase was vacated by a federal court and formally removed by DOL.
EZTime labor rule alerts flag overtime and missed rest periods before payroll.
Classification is one of the most expensive things employers get wrong. Calling someone “salaried” or giving them a manager title does not make them exempt. If the tests are not met, the employee is non-exempt, and any unpaid overtime can be owed back. Here is how the rules work and how to check your own roles.
Exempt vs. non-exempt at a glance
| Non-exempt | Exempt | |
|---|---|---|
| Overtime | Time and a half for hours over 40 in a workweek | Not required under federal law |
| Minimum wage | Required | Salary must meet the salary level |
| How paid | Usually hourly, can be salaried | Salary basis (fee basis for some roles) |
| Time tracking | Hours worked each day and week must be recorded | Hours are not required for overtime purposes, though many employers still track attendance |
| Pay deductions | Paid for hours worked | Salary generally cannot be cut for partial days |
The three tests for exemption
The main federal exemptions are for executive, administrative, professional, computer and outside sales employees. According to DOL Fact Sheet #17A, an employee generally must meet all of these to qualify:
1. Salary level test
The employee must be paid at least the standard salary level. DOL’s salary levels page lists:
- Standard salary level: $684 per week, equal to $35,568 per year.
- Highly compensated employees: $107,432 per year in total compensation, including at least $684 per week paid on a salary or fee basis.
Employers may use nondiscretionary bonuses and incentive payments, including commissions, paid annually or more often, to satisfy up to 10 percent of the standard salary level. Computer employees can alternatively be paid at least $27.63 per hour.
2. Salary basis test
The employee receives a predetermined amount each pay period that is not reduced because of the quality or quantity of work. Under 29 CFR 541.602, an exempt employee must receive the full salary for any week in which they perform any work, with limited exceptions, such as full-day absences for personal reasons and certain disciplinary suspensions of full days. Docking an exempt employee for a few hours off can put the exemption at risk.
3. Duties test
The employee’s primary duty must match one of the exemptions. In summary, from Fact Sheet #17A:
- Executive: primary duty is managing the enterprise or a recognized department or subdivision; customarily directs the work of at least two 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 management or general business operations, 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, customarily acquired through a prolonged course of specialized instruction.
- Creative professional: primary duty requires invention, imagination, originality or talent in a recognized artistic or creative field.
- Computer employee: work such as systems analysis, or the design, development and testing of computer systems or programs.
- Outside sales: primary duty is making sales or obtaining orders or contracts, and the employee is customarily and regularly away from the employer’s place of business. The salary requirements do not apply to outside sales.
What happened to the 2024 salary increase?
In 2024, DOL issued a rule raising the standard salary level in steps. On November 15, 2024, the U.S. District Court for the Eastern District of Texas vacated that rule nationwide. On May 15, 2026, DOL published a technical amendment in the Federal Register, effective the same day, that removed the 2024 text from the regulations and restored the earlier rules. That means the federal levels in effect as of late 2026 are $684 per week and $107,432 per year for highly compensated employees.
Federal law is only the floor. Several states set higher salary levels or stricter duties tests for exemption under state law. If you operate in more than one state, check each state labor department and apply whichever rule is more protective for the employee.
Quick salary level check
Does this salary meet the federal level?
Enter a salary and pay frequency to see the weekly equivalent compared with the federal standard salary level of $684 per week.
Checks the federal salary level only. The salary basis and duties tests must also be met, and your state may require more.
Non-exempt employees: what you must do
For non-exempt employees, the FLSA requires:
- Overtime at not less than time and one-half the regular rate for hours worked over 40 in a workweek. A workweek is a fixed, recurring period of 168 hours, and averaging hours over two or more weeks is not permitted.
- Accurate records of hours worked each day and each workweek, plus pay details, under DOL’s recordkeeping rules.
- Pay for all hours worked, including work you did not request but allowed to happen.
Worked example: a non-exempt employee earns $20 per hour and works 46 hours in a workweek. Pay is 40 x $20 = $800, plus 6 overtime hours x $30 = $180, for $980 total. Check your own numbers with the overtime calculator or total a week’s punches with the time card calculator. For the full set of rules, see our FLSA overtime rules guide.
Common misclassification mistakes
- Relying on job titles. An “assistant manager” who mostly runs a register is likely non-exempt.
- Paying a salary below the level. A salaried employee earning under $684 per week is non-exempt under federal rules, regardless of duties.
- Docking partial days. Reducing an exempt employee’s salary for a late arrival or a few hours off can undermine the exemption.
- Treating “salaried” as “exempt.” You can pay a non-exempt employee a salary, but you still owe overtime and must track hours.
- Never reviewing roles. Duties change over time. Review classifications when jobs change and at least once a year.
How EZTime helps
For non-exempt teams, EZTime’s time clock records actual hours from the mobile app, NFC tags, a tablet kiosk, biometric clocks, web or SMS, and labor rule alerts warn managers before someone goes into overtime. Timecard corrections need approval, and payroll-ready exports in Excel or PDF work with any payroll software, so overtime is paid from real hours. Exempt employees can use the same app for attendance, schedules and time off. Plans start at $2 per employee per month with a 14-day trial.
This article is general information, not legal advice. Laws change; check your state labor department or an employment attorney before making decisions.
Frequently asked questions
What is the difference between exempt and non-exempt employees?
Non-exempt employees must receive at least minimum wage and overtime for hours over 40 in a workweek. Exempt employees meet the salary level, salary basis and duties tests for an FLSA exemption and are not owed overtime under federal law.
What is the exempt salary threshold in 2026?
The federal standard salary level is $684 per week ($35,568 per year), and the highly compensated employee level is $107,432 per year. The 2024 increases were vacated in November 2024 and removed from the regulations by DOL in May 2026. Some states set higher levels.
Can a salaried employee be non-exempt?
Yes. Being paid a salary is only one test. A salaried employee who earns less than the salary level or does not meet a duties test is non-exempt and must be paid overtime.
Do I need to track hours for exempt employees?
Federal overtime recordkeeping focuses on non-exempt employees. Many employers still track attendance and time off for exempt staff, and some state laws or client contracts may require more.
What happens if I misclassify an employee as exempt?
You may owe back overtime for the hours worked over 40, and potentially additional damages. If you find a misclassification, fix it going forward and get advice on correcting past pay.