How to Determine Exempt vs. Non-Exempt: Salary, Basis, and Duties

Under federal law, the exempt vs non-exempt three tests are the salary level test, the salary basis test, and the duties test, and a worker is exempt from overtime only if all three are satisfied. A high salary alone does not do it, a manager title alone does not do it, and passing two tests out of three still leaves the worker entitled to time-and-a-half for every hour past forty in a workweek.¹

The Fair Labor Standards Act exempts workers employed in a “bona fide executive, administrative, or professional capacity,” along with certain computer employees and outside salespeople.² The Department of Labor’s regulations at 29 CFR Part 541 turn that phrase into the three tests below.³ Miss any one and the exemption fails.

Test One: The Salary Level

The current enforceable threshold is $684 per week, which works out to $35,568 per year. A worker earning less is non-exempt and owed overtime no matter what their duties look like.⁴ This is the figure from the 2019 rule and remains the number the Department of Labor enforces after a federal court vacated a 2024 rule that would have raised it to $1,128 per week.

To check your own pay, compare gross weekly wages to $684. If you are paid monthly, multiply the monthly salary by twelve and divide by fifty-two. Only base salary (or fees, for administrative and professional workers) counts toward the threshold; board, lodging, and similar benefits do not.⁵

The threshold is not prorated for part-timers. A twenty-hour-per-week employee still has to earn the full $684 weekly for the exemption to apply.⁶

Two carveouts sit alongside the standard threshold. Computer employees paid hourly can qualify at $27.63 per hour or more, an option no other exempt category has.⁷ And a small group of workers is exempt from the salary level and salary basis rules altogether: teachers, practicing lawyers, practicing physicians, outside sales employees, and business owners who hold at least a 20-percent equity interest and actively manage the company.⁸

Test Two: The Salary Basis

Earning enough is only half of the pay analysis. An exempt worker must also be paid on a salary basis: a fixed, predetermined amount each pay period that does not go up or down with the quality or quantity of the work. If the employee does any work in a given week, the full salary is due for that week regardless of hours or days worked.⁹

Some deductions are prohibited. An employer cannot dock an exempt worker’s pay because business was slow or the office closed early. Improper deductions can strip the exemption and trigger back overtime liability. Proportionate pay is permitted in the first and last weeks of employment, and full-day deductions are allowed for unpaid FMLA leave.⁹

The Safe Harbor for Payroll Mistakes

A single improper deduction does not automatically wreck the exemption for everyone affected. The regulations preserve exempt status if the employer meets four conditions: a clearly communicated written policy prohibiting improper deductions and distributed to employees before the deductions happened, a complaint mechanism inside that policy, prompt reimbursement of any improper deductions, and a good-faith commitment to comply going forward.¹⁰

Even with the safe harbor in place, the exemption is lost if the employer willfully keeps making improper deductions after receiving complaints.¹⁰

Test Three: The Duties

Every duties test asks the same threshold question: what is the worker’s primary duty? Primary duty means the principal, main, or most important duty performed. Time is a factor but not a strict rule. Spending more than half the workweek on exempt tasks usually satisfies the requirement, and a worker can still qualify with less if the exempt duties are the most important part of the job, the worker operates free of close supervision, and their pay reflects that responsibility compared to non-exempt coworkers.¹¹

The cleanest way to evaluate primary duty is to hold the written job description next to what the worker actually does. A daily task log kept for several weeks, matched against org charts and payroll records, is the evidence a classification decision should rest on.

Executive Employees

The executive exemption covers workers whose primary duty is managing the business or a recognized department. The worker must also regularly direct at least two full-time employees, or the equivalent (four half-time employees, for example), and must have real authority to hire or fire—or recommendations on hiring, firing, and other status changes that carry particular weight.¹²

A frequent trap: a “supervisor” or “manager” who spends most of the day doing the same hands-on work as the team, with only occasional scheduling or hiring input, generally does not clear this test.

Administrative Employees

The administrative exemption applies to office or non-manual work directly related to the management or general business operations of the employer or the employer’s customers. The worker must exercise independent judgment on matters of significance—real decision-making authority, not following scripts, checklists, or step-by-step procedures.¹³

Human resources managers, tax specialists, and financial analysts often fit here. Workers who apply established procedures without discretion do not, even if the volume of paperwork or data is high.

Professional Employees

The professional exemption splits in two. A learned professional performs predominantly intellectual work that requires advanced knowledge in a field of science or learning, gained through a prolonged course of specialized study, and consistently exercises judgment. A specific-field degree is the usual marker, though the knowledge itself is what governs.¹⁴ Registered nurses, engineers, accountants, and architects are typical examples.

A creative professional performs work requiring invention, imagination, originality, or talent in a recognized artistic or creative field. Writers, musicians, composers, and graphic designers can qualify when the work involves genuine creative input rather than routine or mechanical tasks.

Computer Employees

Systems analysts, programmers, software engineers, and similarly skilled computer workers can qualify if their primary duty is designing, developing, testing, or analyzing computer systems or programs from user or system specifications, or applying systems analysis techniques to determine hardware or software requirements.¹⁵ Job titles carry no weight. An “IT support specialist” who mostly runs pre-written diagnostic scripts is not covered.

Outside Sales Employees

The outside sales exemption applies where the worker’s primary duty is making sales or obtaining orders or contracts, and the worker is customarily and regularly engaged away from the employer’s place of business.¹⁶ Neither the salary level nor the salary basis test applies. Deliveries and collections that are incidental to the employee’s own outside sales count as exempt work. Selling by phone, email, or from a fixed office does not qualify, even with the occasional client visit.

The Highly Compensated Employee Shortcut

There is a simplified path for higher earners. The current enforceable total annual compensation threshold is $107,432.⁴ Commissions and nondiscretionary bonuses count toward that total, but the worker must still receive at least $684 per week on a salary or fee basis.

The duties requirement is easier here: the worker only needs to customarily and regularly perform at least one exempt duty of an executive, administrative, or professional employee, instead of clearing the full duties test for any single category. Even so, the primary duty must be office or non-manual work. Construction workers, electricians, and production-line employees cannot use this shortcut no matter how much they earn.¹⁷

Workers Who Cannot Be Exempt Under These Rules

Federal regulations pull manual laborers and “blue collar” workers out of every white-collar exemption, whatever they earn. Workers who perform repetitive operations with their hands, physical skill, and energy, and who learn their trade through apprenticeship or on-the-job training rather than specialized academic instruction, stay entitled to overtime. Carpenters, plumbers, mechanics, electricians, longshoremen, and other non-management workers in maintenance, construction, and manufacturing all fall in this category.¹⁸

First responders are also outside the white-collar exemptions. Police officers, firefighters, paramedics, and similar protective-service workers cannot be classified as exempt under these rules even at high salaries or with supervisory titles below the rank of captain or equivalent.

State Law Can Raise the Bar

Federal law is the floor. If a state sets a higher salary threshold or a stricter duties test, the employer follows whichever standard is more protective of the worker.¹⁹ Several states set exempt-status thresholds well above the federal $684 per week, and some layer on their own duties tests. Check your state labor department’s overtime rules before relying on the federal analysis alone.

What Misclassification Costs

When a non-exempt worker has been treated as exempt, the employer owes unpaid overtime for every qualifying hour. The FLSA then adds liquidated damages equal to the unpaid amount, which doubles the exposure.²⁰ A court can reduce or eliminate the liquidated damages only if the employer proves the misclassification was made in good faith with reasonable grounds for believing it was lawful.²¹

The window for filing is two years from the date of the violation, or three years if the violation was willful. Because overtime shortfalls tend to repeat every week, back pay can pile up quickly across that period.

The Department of Labor can also impose civil money penalties of up to $2,515 for each repeated or willful overtime or minimum wage violation.²² Employees who win in court are entitled to reasonable attorney’s fees from the employer as well.²⁰

If You Think You Have Been Misclassified

You can file a confidential complaint with the Department of Labor’s Wage and Hour Division at 1-866-487-9243 or through dol.gov/agencies/whd.²³ A private lawsuit in federal or state court is also available, individually or on behalf of similarly affected coworkers.²⁰ Before you file, pull together several months of pay stubs, your written job description, and a daily log of what you actually do. Those three documents are what a classification analysis turns on.

1
Office of the Law Revision Counsel. 29 USC Ch. 8 – Fair Labor Standards
2
Office of the Law Revision Counsel. 29 USC 213 – Exemptions
3
eCFR. Part 541 – Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Computer and Outside Sales Employees
4
U.S. Department of Labor. Earnings Thresholds for the Executive, Administrative, and Professional Exemptions
5
eCFR. Part 541 – Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Computer and Outside Sales Employees – Section 541.600
6
U.S. Department of Labor. Fact Sheet 17G – Salary Basis Requirement and the Part 541 Exemptions Under the FLSA
7
U.S. Department of Labor. Fact Sheet 17E – Exemption for Employees in Computer-Related Occupations Under the FLSA
8
U.S. Department of Labor. Small Entity Compliance Guide to the FLSA Exemptions
9
eCFR. 29 CFR 541.602 – Salary Basis
10
eCFR. 29 CFR 541.603 – Effect of Improper Deductions From Salary
11
eCFR. 29 CFR 541.700 – Primary Duty
12
eCFR. 29 CFR 541.100 – General Rule for Executive Employees
13
eCFR. 29 CFR 541.200 – General Rule for Administrative Employees
14
eCFR. 29 CFR 541.300 – General Rule for Professional Employees
15
eCFR. 29 CFR 541.400 – General Rule for Computer Employees
16
eCFR. 29 CFR 541.500 – General Rule for Outside Sales Employees
17
eCFR. 29 CFR 541.601 – Highly Compensated Employees
18
eCFR. 29 CFR 541.3 – Scope of the Section 13(a)(1) Exemptions
19
U.S. Department of Labor. Fact Sheet 7 – State and Local Governments Under the FLSA
20
Office of the Law Revision Counsel. 29 USC 216 – Penalties
21
Office of the Law Revision Counsel. 29 USC 260 – Liquidated Damages
22
U.S. Department of Labor. Civil Money Penalty Inflation Adjustments
23
U.S. Department of Labor. How to File a Complaint