Compliance guideRead at source, 23 September 2026

Exempt vs Non-Exempt Employees: The FLSA Tests, the 2026 Salary Threshold and the Frontline Titles That Get It Wrong

An exempt employee is not entitled to overtime under the Fair Labor Standards Act; a non-exempt employee must be paid time and a half for hours over 40 in a workweek. To be exempt under the white-collar exemptions, a worker generally has to pass three tests: be paid a fixed salary, of at least $684 a week ($35,568 a year) — the federal level the Department of Labor enforces in 2026 — and have a primary duty that is executive, administrative or professional. The job title decides nothing. In frontline businesses the usual mistake is putting a shift lead or assistant manager on salary and assuming that makes them exempt.

Exempt vs non-exempt: the three tests

The Fair Labor Standards Act gives almost every employee a right to overtime. The exemptions are the exceptions, and the employer has to show the exception applies. For the executive, administrative and professional exemptions — the ones most employers mean when they say “salaried” — the Department of Labor’s Fact Sheet 17G sets out three requirements, and all three must be met:

• Salary basis. The employee receives a predetermined amount each pay period that is not reduced because of the quality or quantity of the work. An hourly wage fails this test no matter how high it is (outside the separate rules for certain computer and professional roles).
• Salary level. At least $684 a week, which the Department describes as equivalent to $35,568 a year. Some states set a higher floor; the state rule wins where it is more protective.
• Duties. The employee’s primary duty must be the kind of work the exemption describes. The regulation defines primary duty as “the principal, main, major or most important duty that the employee performs.”

Fact Sheet 17G puts the part employers most often skip in one line: “Job titles do not determine exempt status.” Neither does paying a salary. A salaried shift lead who fails the duties test is non-exempt and is owed overtime.

The 2026 salary threshold, and what happened to the 2024 rule

The federal salary level is $684 a week ($35,568 a year), and the highly compensated employee threshold is $107,432 a year, including at least $684 a week paid on a salary basis. These are the 2019 figures.

The Department of Labor’s 2024 rule would have raised them, but it was vacated by a federal court in Texas in November 2024, and the appeals were dismissed in May 2026. On May 15, 2026 the Department published a final rule that returns the 2019 figures to the Code of Federal Regulations. In its own words, the rule “merely conforms the text in the CFR to reflect the courts’ vacatur of the 2024 rule.” It is not a new salary rule, and we found no proposal for one. If you read an article quoting $43,888 or $58,656, it is describing the vacated rule.

States with a higher exempt salary floor in 2026

Annual figures for Washington and New York are the published weekly amount multiplied by 52. State duties tests can also be stricter than the federal one — California, for example, looks at the share of time spent on exempt work — so check the state rule for any role near the line. Daily overtime is a separate question, covered on our page on overtime laws by state.

The duties tests, in plain language

Executive

Under 29 CFR 541.100, an exempt executive’s primary duty is managing the enterprise or a recognized department or subdivision of it; they “customarily and regularly direct the work of two or more other employees”; and they have authority to hire or fire, or their recommendations on hiring, firing and promotion carry particular weight. Section 541.104 clarifies that “two or more other employees” means two full-time employees or their equivalent — one full-time and two half-time employees count.

Administrative

The administrative exemption covers office or non-manual work directly related to the management or general business operations of the employer or its customers, where the employee exercises discretion and independent judgment on matters of significance. A scheduler who applies a set procedure, or a dispatcher who routes calls by protocol, is usually doing important work without the kind of independent judgment the exemption requires.

Professional

The learned professional exemption covers work requiring advanced knowledge in a field of science or learning, customarily acquired through a prolonged course of specialized study — registered nurses paid on a salary basis are the common frontline example; licensed practical nurses generally are not. The creative professional exemption rarely comes up in hourly hiring.

Common frontline misclassifications

These are the titles that cause most of the trouble in the businesses we work with. The reading is ours, applied to the regulation; the facts of a specific job decide it.

• Shift lead. Usually non-exempt. A lead who runs a register or a line for most of the shift, and whose “supervision” is covering breaks and assigning stations, rarely has management as the primary duty and rarely has hiring or firing weight.
• Assistant manager. The regulation’s own example of a hard case. Section 541.106 says an assistant manager in a retail establishment may serve customers, cook food, stock shelves and clean and still be exempt “if the assistant manager’s primary duty is management.” The same title fails when the person is effectively a senior crew member who happens to hold keys.
• Dispatcher. Usually non-exempt, for the administrative-exemption reason above.
• Site or unit supervisor in care settings. Often exempt if they genuinely manage a unit and at least two full-time-equivalent staff; often not if they are counted in the staffing ratio and spend the shift on care.
• Trainees and “manager in training.” A trainee who is not yet doing the exempt duties is not exempt during the training period, whatever the offer letter says.

What misclassification costs

The remedy under 29 U.S.C. 216(b) is the unpaid overtime “and in an additional equal amount as liquidated damages” — double the back pay — plus the employee’s attorney’s fees. The lookback is two years, or three for a willful violation, under 29 U.S.C. 255(a). State law can add penalties and longer lookbacks.

Reclassifying going forward is usually cheaper than defending the old classification. The common approach is to convert the role to hourly at a rate that keeps expected annual earnings similar at normal hours, track time from the conversion date, and get advice on how to handle the lookback period.

What this means for the job ad

Candidates for hourly and frontline roles read the pay line first. “$45,000 salary” and “$21.63 an hour plus overtime” can describe the same job and read as different offers, and the second is often the more attractive one for a 50-hour role. If a role is non-exempt, say hourly and say overtime is paid. If it is exempt, say salaried and state the expected hours honestly; a candidate who discovers the 55-hour week in the first month is an early-turnover statistic. Several states also require a pay range in the posting — see pay transparency laws by state — and the total cost of either version is on our employee cost calculator.

What this page cannot do

It cannot classify a specific job. Exemption turns on what the person actually does, week to week, and the same title can be exempt in one building and not in the next. Use the tests here to find the roles that need a closer look, and take those to employment counsel.

Frequently asked questions