The basic definitions
Non-exempt employees are covered by the Fair Labor Standards Act's minimum wage and overtime rules: they must be paid at least one and one-half times their regular rate for hours over 40 in a workweek. Exempt employees are excluded from the overtime requirement because they meet specific legal tests. Most hourly workers are non-exempt. Some salaried employees are exempt and some are not.
The Department of Labor's fact sheet on the executive, administrative, professional and computer exemptions explains that to qualify, an employee generally must be paid on a salary basis at not less than a specified weekly amount (the fact sheet lists $684 per week) and must perform the duties described for that exemption. Because exemption requires a salary basis, a worker paid strictly by the hour cannot qualify under those white-collar exemptions.
The three questions to ask
- How am I paid? A fixed salary regardless of hours, or an hourly wage? An hourly wage points to non-exempt.
- Is the salary high enough? The salary level in the Department of Labor fact sheet is a minimum for the white-collar exemptions. Falling below it means non-exempt. The figure is updated by rulemaking and court decisions, so check dol.gov for the current number rather than relying on a copy.
- Do my duties fit the exemption? Duties, not the job title, decide. Calling someone a “manager” does not make them exempt if they do not perform the exempt duties.
A comparison table
| Non-exempt | Exempt | |
|---|---|---|
| Overtime pay at 1.5x over 40 h/week (federal) | Yes | No (under the FLSA) |
| Typical pay method | Hourly, or salary plus overtime | Salary basis |
| Must track hours for pay | Employer must keep records of hours | Pay does not vary with hours; tracking is optional but useful |
| Rate used for overtime | Regular rate (includes non-discretionary bonuses) | Not applicable |
Worked examples
Salaried but non-exempt
An office clerk is paid $640 a week, below the weekly minimum cited in the DOL fact sheet, so the clerk cannot be treated as exempt under these tests. Suppose the $640 is understood to cover a 40-hour week: the regular rate is $640 ÷ 40 = $16.00. In a 46-hour week, 6 hours are overtime at 1.5 × $16.00 = $24.00, so the clerk is owed $640 + 6 × $24 = $784.00. How the regular rate is set for a salary depends on what hours the salary was agreed to cover, so confirm with the Department of Labor or your state before relying on this illustration.
Hourly worker who asks for a promotion to 'salaried manager'
An hourly employee at $22/hour regularly works 48 hours, earning 40 × $22 + 8 × $33 = $1,144 per week. If they become a salaried “manager” at $52,000 ($1,000 a week) without meeting the duties test, they could be non-exempt and still owed overtime. If they do meet the duties and salary tests, they lose overtime and might earn less per hour worked. Compare offers with the salary to hourly calculator.
Why this matters when you track hours
If you are non-exempt, your time card is the basis of your pay, and mistakes cost money: use the time card calculator and keep your own record. If you are exempt, you may still want to track hours to see your effective hourly rate or to document a dispute. State laws can be stricter than federal rules: some states set higher salary thresholds, so being exempt federally may not mean exempt in your state.
Common misconceptions
- “I'm salaried, so I can't get overtime.” Not necessarily. The salary basis is one test among several, and the duties test matters too.
- “My title says manager.” Duties decide, not titles.
- “I signed an agreement that I'm exempt.” An agreement does not by itself make an employee exempt if the legal tests are not met.
- “Everyone who is paid hourly gets overtime.” Most do, but some jobs and industries have specific exemptions in federal or state law; check the sources.
The effective hourly rate of an exempt job
$65,000 salary, different weeks
At 40 hours a week (2,080 hours), $65,000 is $31.25 an hour. At 50 hours a week (2,600 hours) it is $25.00 an hour. At 55 hours (2,860 hours) it is $22.73 an hour. If you are exempt, overtime is not owed, but tracking your hours with the time card calculator shows what each extra hour is really worth to you.
What employers should do
Classification is the employer's responsibility. Review each role against the Department of Labor's fact sheet, document the duties performed, keep records for non-exempt staff as required by 29 CFR 516.2, and look at state law, which can be stricter than the federal rule. When in doubt, ask the Wage and Hour Division or a qualified employment professional.
Next steps if you are unsure
Gather your job description, pay stub and typical weekly hours. Compare your salary with the fact-sheet level and your duties with the exemption description. Then ask your employer or HR for the basis of your classification, and if you still have questions contact the Wage and Hour Division or your state labor department.