What the two categories mean under federal law, how the three tests work, and how to track time for each group without mistakes.
“Exempt” and “non-exempt” describe whether an employee is exempt from the minimum wage and overtime requirements of the FLSA. Most US workers are non-exempt by default. An employer who wants to treat someone as exempt carries the burden of showing that the role qualifies, and the Department of Labor (DOL) and courts look at what the person really does every day, not at what the offer letter says.
EZTime labor rule alerts flag overtime and missed rest periods before payroll.
It helps to separate two ideas that are often mixed up. Being salaried describes how someone is paid. Being exempt describes whether overtime rules apply. A salaried employee can still be non-exempt and owed overtime, while an hourly employee is almost always non-exempt. If you want a quick refresher on the pay side, see our glossary entry on wage vs. salary.
The most common exemptions are the so-called white-collar exemptions for executive, administrative and professional employees, plus related categories for outside sales and certain computer employees. For the white-collar group, an employee generally has to pass all three of the following tests.
Some roles have their own rules. Outside sales employees, for example, are not subject to the salary tests, and certain professionals such as doctors, lawyers and teachers are treated differently. When a role sits near the line, it is worth asking a qualified employment attorney before deciding.
| Topic | Non-exempt | Exempt |
|---|---|---|
| Overtime under the FLSA | Yes, at least 1.5x the regular rate for hours over 40 in a workweek | No federal overtime requirement |
| Minimum wage | Must receive at least the applicable minimum wage for all hours worked | Covered by the salary level instead |
| How pay is set | Usually hourly, sometimes salary plus overtime | Fixed salary that meets the salary basis and level tests |
| Time records | Employer must keep records of hours worked each day and week | Hours are not required by the FLSA, though many employers still track attendance and leave |
| Typical roles | Cashiers, line cooks, warehouse associates, technicians, many office assistants | Qualifying managers, certain administrative and professional roles |
State law can change this picture. Some states have their own overtime rules, daily overtime, higher salary levels or narrower duties tests, so always check the state where the employee works.
Misclassification is one of the most frequent sources of wage claims, and it often happens with good intentions. These are the patterns to watch for:
If an employee who was treated as exempt is later found to be non-exempt, the employer may owe back overtime, and possibly additional damages. Because the risk builds over time, a periodic review of job descriptions against real duties is a sensible habit.
For non-exempt employees, accurate time records are not optional. The FLSA requires employers to keep records of hours worked each workday and workweek, along with pay information. Records also protect you if hours are ever disputed. A time clock that captures each clock-in, clock-out and break, and keeps a history of any edits, makes this much easier. Our guide to timekeeping best practices covers the details, and FLSA overtime rules explains how overtime is calculated.
For exempt employees, many businesses still track attendance, time off and project hours, for example to manage PTO balances or bill clients. That is allowed, as long as tracking does not lead to pay deductions that break the salary basis rule.
With EZTime’s time clock, employees can clock in from the mobile app, a shared kiosk or an NFC tag, and managers can see hours building up during the week. Overtime alerts help you spot a non-exempt employee approaching 40 hours before the week ends, and payroll-ready exports keep the numbers consistent with what your payroll provider needs.
Imagine a small retail chain with a store lead at each location (a fictional example). The store leads are paid a salary above the federal level and are called “managers.” On review, the owner finds that at two stores the lead schedules and supervises a team of five, handles hiring and sets daily priorities. At a third, smaller store, the lead mostly runs the register and restocks shelves alongside one part-time colleague and has no real authority over staffing.
The first two roles may well qualify for the executive exemption. The third probably does not, despite the same title and the same salary. The safer choice is to treat that person as non-exempt, track their hours and pay overtime when it applies, or to change the role so it genuinely fits the exemption.
Yes. Salary is a way of paying, not a classification. A salaried employee who does not meet all the exemption tests is non-exempt and is owed overtime for hours over 40 in a workweek under federal law.
As of 2026, the DOL has restored the $684 per week ($35,568 per year) level, with $107,432 for highly compensated employees. Some states set higher levels, and you must follow whichever is higher.
The FLSA does not require hour records for exempt employees, but many employers track attendance and time off anyway. Avoid using those records to make salary deductions that the rules do not allow.
No. Classification depends on pay and duties, not on preference or agreement. An employee cannot waive the right to overtime.
At least once a year, and whenever duties, pay or the legal thresholds change.
Set overtime thresholds and weekly hour limits in EZTime and managers get an alert while there is still time to change the schedule.