Exempt versus non-exempt employees

“Exempt” and “non-exempt” are the two words on a job offer that most affect how pay works, and they are widely misunderstood. They refer to whether the Fair Labor Standards Act’s minimum wage and overtime provisions apply to the position.

The default is non-exempt

Every employee covered by the FLSA is entitled to the minimum wage and to overtime after 40 hours unless an exemption in section 13 of the statute applies. Exemptions are read narrowly, and the employer carries the burden of showing one applies. Being paid a salary does not by itself make anyone exempt; being called a manager does not; signing an agreement does not. Only meeting the tests does.

The white-collar exemptions

The most common exemptions are for executive, administrative and professional employees, with related ones for computer employees and outside sales. Part 541 of the regulations sets three tests, and all must be met.

Salary basis. The employee is paid a predetermined amount each pay period that does not vary with the quantity or quality of work. Deductions for partial-day absences, with narrow exceptions, break the salary basis.

Salary level. The salary must meet a minimum set by regulation. The level set in the 2019 rule is $684 a week, equivalent to $35,568 a year. A 2024 rule raised it in two steps, but a federal court vacated that rule in November 2024, and DOL’s current pages state the $684 figure. Highly compensated employees face a relaxed duties test at a higher total compensation threshold. Teachers, lawyers, physicians and outside sales employees are not subject to the salary tests.

Duties. The employee’s primary duty must match the exemption. Executive: managing the enterprise or a recognized department, regularly directing at least two full-time employees, with authority or real influence over hiring and firing. Administrative: office or non-manual work directly related to management or general business operations, with discretion and independent judgment on significant matters. Professional: work requiring advanced knowledge in a field of science or learning acquired by prolonged specialized instruction (learned professional), or invention, imagination or talent in a recognized artistic field (creative professional). Computer employee: systems analysis, design or programming at a defined level, paid at least the salary level or $27.63 an hour.

The duties test is where most disputes lie. A retail “assistant manager” who spends most hours on the register, a “coordinator” who follows a manual, and a “junior analyst” who applies set procedures are usually non-exempt whatever the title or salary.

Other exemptions

Section 13 contains many more, some from both minimum wage and overtime and some from overtime only: certain agricultural workers, employees of some seasonal amusement establishments, certain commissioned retail sales employees, motor carrier drivers under Department of Transportation jurisdiction, and others. Each has its own conditions in the statute and regulations.

What exempt status changes

An exempt employee may be required to work more than 40 hours with no additional pay. A non-exempt employee must receive overtime at one and one-half times the regular rate for those hours and may be paid hourly or by salary; see overtime basics. Exempt status does not affect taxes, benefits, or any protection outside the FLSA’s wage and hour rules.

State law

Several states set higher salary thresholds or stricter duties tests than the federal ones, California and New York among them, and some states’ tests are tied to multiples of the state minimum wage. An employee exempt under federal law can be non-exempt under state law, in which case the state rule applies.

Reading wage data

OEWS does not record exempt status. The occupation tables mix exempt and non-exempt workers, and since the wages are straight-time rates, non-exempt workers’ overtime earnings are not in them. The occupations clustered just above the salary level, such as first-line supervisors and many administrative roles, are where the distinction most affects take-home pay.

Beyond this summary

Whether a specific position is exempt depends on its actual duties, not its description. DOL’s fact sheets set out the tests and examples; the sister site FastCalc has an exempt salary threshold calculator for the arithmetic; the sister site FastGuide covers what to do if a position has been misclassified.