Whether an employee is exempt or non-exempt determines overtime eligibility under the Fair Labor Standards Act (FLSA). Getting this wrong is one of the most common — and expensive — HR mistakes employers make.
The Core Difference
| Exempt | Non-Exempt | |
|---|---|---|
| Overtime pay required | No | Yes — 1.5× for hours over 40/week |
| Minimum wage required | No (if meeting salary test) | Yes — federal $7.25/hr minimum |
| Pay type | Salary-based | Hourly or salary |
| 2026 minimum salary | $684/week ($35,568/year) | No minimum for this purpose |
2026 Salary Threshold: $684/Week
To qualify as exempt, an employee must earn at least $684 per week ($35,568/year) on a salary basis. Employees earning below this threshold are automatically non-exempt regardless of job title or duties. This threshold was set in 2019 and has not changed for 2026.
Highly compensated employees (HCE) earning at least $107,432/year meet a simplified duties test — they only need to perform one exempt duty to qualify.
The Three Duties Tests (White Collar Exemptions)
Earning the salary threshold alone is not enough. Exempt employees must also meet one of these duties tests:
1. Executive Exemption
- Primary duty is management of the enterprise or a department
- Regularly directs the work of two or more full-time employees
- Has authority to hire/fire (or strong recommendations are given particular weight)
2. Administrative Exemption
- Primary duty is office or non-manual work directly related to management/general business operations
- Primary duty includes the exercise of discretion and independent judgment on significant matters
3. Professional Exemption
- Primary duty requires advanced knowledge in a field of science or learning
- Knowledge must be acquired through prolonged specialized study (doctors, lawyers, engineers, architects, CPAs, teachers, pharmacists)
Common Misclassification Errors
Job title does not determine exemption status. Calling someone a "manager" or "director" is not enough — their actual day-to-day duties must meet the test. Courts look at what the employee actually does, not what the job title says.
Industries with frequent misclassification issues: retail store managers, restaurant managers, inside sales reps, call center supervisors, paralegals, IT support staff, and assistant managers.
State Overtime Laws That Exceed FLSA
Some states require overtime after fewer than 40 hours/week or have higher salary thresholds. California requires daily overtime after 8 hours and has a higher exempt salary threshold. Always check your state's rules — employees get the more generous protection.
Use the overtime pay calculator to compute exact overtime amounts.