Practice Pointer: Key Differences between Exempt vs. Non-Exempt Employee Classifications

07.27.2026

Exempt or non-exempt – that is the question, and it’s a common one! Many employees (and employers!) think of exemption status simply as a pay type (either salaried or hourly); however, there are critical distinctions that trigger several other requirements, including paid overtime, meal and rest breaks, and timekeeping, to name a few.

Has an employee ever asked to be salaried because it was their preference?  Has your organization ever classified an employee as exempt because there is no way to track their time? If you answer yes to either question, you are not alone, but you may be out of compliance with the Fair Labor Standards Act (FLSA). Non-compliance places your organization at risk of a wage-and-hour claim, which could lead to audits, litigation, payment of unpaid overtime, and/or penalties. In this Practice Pointer, we’ll break down the core requirements for determining an employee’s exempt or non-exempt status and provide best practices for the gray areas.

Fair Labor Standards Act (FLSA) Guidance

The FLSA is administered by the Wage and Hour Division of the U.S. Department of Labor (DOL) and establishes basic wage-and-hour laws and protections for employees. Primarily, the FLSA requires that non-exempt employees be paid a minimum hourly wage and receive overtime pay for all hours worked over 40 in a workweek. However, the FLSA provides exemptions from both the minimum wage and overtime pay requirements for employees classified as bona fide executives, administrators, professionals, outside salespersons, and/or certain computer employees.

To qualify for an exemption, employees must generally meet all three of the following criteria:

1. Salary Basis Test – The employee must receive a guaranteed minimum salary for any workweek in which they perform any work.
2. Salary Level Test – The employee must earn at least the minimum salary threshold established under applicable federal and state law. Because salary thresholds are subject to change and legal challenges, employers should verify current requirements before making exemption determinations.
3. Duties Test – The employee’s primary job duties must align with one of the defined exemption categories: Executive, Administrative, Professional, Computer, and Outside Sales

An exception to the standard salary level applies to highly compensated employees who earn $107,432 or more annually. These employees may qualify for exempt status if they regularly perform at least one of the exempt duties of an executive, administrative, or professional employee.

The “Duties” Test

Determining whether an employee is exempt vs non-exempt comes down to more than just pay. The job duties test must also be reviewed and met to remain in compliance. While the Salary Basis and Salary Level tests, which focus on how much and how consistently an employee is paid, are generally straightforward to apply, the Duties Test, which examines what the employee actually does on the job, often presents the greatest challenge for employers. It’s also important to note that exemption status cannot be determined solely by an employee’s job title. Instead, employers must evaluate the employee’s primary job duties and determine whether those satisfy the requirements of one of the specific FLSA exemption categories.

For instance, although an Administrative Assistant may provide essential support to the organization, the role typically does not qualify for the Administrative Exemption unless its primary duties include the regular exercise of discretion and independent judgment on significant matters related to the organization’s management or general business operations. It is also important to note that all employees who hold the same position and perform the same job duties must be classified in the same FLSA status of either exempt or non-exempt – FLSA status is determined by position, not by employee.

Common Misconceptions About Exempt Status

Employers frequently assume that an employee is exempt simply because:

• The employee is paid a salary. Salaried employees are not always exempt employees. It is permissible to pay a non-exempt employee on a salary basis provided there is a way for the employee to indicate when they work more than 40 hours in a workweek so overtime pay requirements are met.
• The employee has a manager or supervisor title. To qualify for Executive exemption, an employee’s primary job duties must include regularly directing the work of at least two full-time employees and having the ability to hire or fire employees. For instance, a call center supervisor who mainly handles calls and has little authority over staffing decisions is likely non-exempt and eligible for overtime pay.
• The employee prefers not to track time. Employee preference cannot factor into determining whether an employee is exempt or non-exempt. Employers are responsible for making the exempt vs non-exempt determination based on whether the position meets the three FLSA exemption tests.

• The employee works independently. Independence alone is not enough. Employers must evaluate the employee’s primary duties to ensure they satisfy the requirements of one of the FLSA exemption categories.

None of these factors alone determines exempt status. To be exempt, the employee must satisfy all applicable salary and duties requirements under federal and state law. Misclassification can result in liability for unpaid overtime, penalties, and back wages; therefore, it is very important to ensure employers are classifying employees correctly.

Importance of Accurate Job Descriptions

Maintaining up-to-date job descriptions that accurately reflect the essential functions, responsibilities, and required skills is a critical tool in performing the job duties test and ultimately determining FLSA status. As job duties naturally evolve over time, it is considered best practice to review and update job descriptions annually to ensure they remain accurate. Current job descriptions not only assist in determining the appropriate FLSA classification but also serve as critical tools for recruitment, performance management, and compliance with the Americans with Disabilities Act (ADA)—particularly in supporting accommodation requests.

During wage and hour investigations, agencies and courts typically evaluate actual job duties performed – not merely the duties outlined in a job description. Therefore, organizations should ensure that job descriptions accurately reflect the work that both hourly and salaried employees perform on a day-to-day basis. Keeping job descriptions aligned with actual job duties helps mitigate compliance risk and reinforces consistency in FLSA classification practices. 

State Salary Threshold Requirements

In addition to federal FLSA requirements, many states have established their own salary thresholds and exemption criteria for determining whether an employee qualifies as exempt. In several cases, state criteria are more stringent than federal law. For example, several states – including California, New York, Washington, Colorado, Alaska, and Maine – have salary thresholds that exceed federal requirements. In addition, some states impose duties tests or wage-and-hour requirements that are more restrictive than federal law. Employers should always apply the standard that is most favorable to the employee.

The Bottom Line

Exempt versus non-exempt classification is one of the most important wage-and-hour compliance decisions employers make. While the salary tests are generally straightforward, the job duties test frequently requires a detailed analysis of the tasks and duties the employee actually performs. There will likely be some employees who fall into a “gray area,” whose status will not be easy to determine. In such cases, best practice is for employers to err on the side of non-exempt status, keeping in mind that the employer bears the “burden of proof” of whether an employee is exempt from minimum wage provisions and overtime pay. When in doubt, employers should conduct a comprehensive review of the position and seek guidance before classifying an employee as exempt. The costs associated with employee misclassification – including unpaid overtime, penalties, audits, and litigation – can be substantial.

If you have any questions regarding this Practice Pointer, please  email us.