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‹ HR Glossary

FLSA exempt vs non-exempt

United States · United States employment
What is the difference between exempt and non-exempt employees?

Under the US Fair Labor Standards Act (FLSA), non-exempt employees must receive overtime at 1.5 times their regular rate after 40 hours a week, while exempt employees do not. Exemption requires both a salary of at least US$684 a week (US$35,568 a year) and duties that genuinely qualify as executive, administrative or professional.

FLSA overtime at a glance (July 2026)

Exempt salary minimumUS$684/week (US$35,568/year)
Highly compensated employee thresholdUS$107,432/year
Overtime rate1.5x the regular rate after 40 hours/week
2024 threshold increaseVacated by court; 2019 levels formally restored May 2026
State overlaysSeveral states set higher salary floors and daily overtime (notably California)

The two-part test everyone shortcuts

Exemption requires salary basis and level (at least $684 a week, unchanged after the 2024 increase to $43,888/$58,656 was vacated by a federal court and formally unwound by the Department of Labor in May 2026) plus a duties test: the job's primary duties must actually be executive, administrative, professional, computer or outside sales work as defined. Paying a salary does not make anyone exempt, and neither does a manager title stapled to non-managerial work; misclassification cases are won on what the person actually does all day.

What non-exempt status obliges

Time-and-a-half after 40 hours in a workweek, calculated on the regular rate (which folds in most bonuses and incentive pay, another common payroll error), plus record-keeping of hours worked. States layer their own rules on top: California most prominently adds daily overtime after 8 hours and its own, much higher, exempt salary floor, so multi-state employers need the state answer, not just the federal one.

The 2025 tax wrinkle that changes nothing operationally

The 2025 federal tax law added a temporary income-tax deduction (tax years 2025 to 2028) for the premium portion of FLSA-required overtime, capped and income-phased. It changes employees' tax outcomes, not employers' obligations: overtime must still be paid, FICA still applies, and describing overtime as "tax-free" or the FLSA as relaxed gets both the tax and the labour law wrong.

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Related terms

Federal minimum wage (US)W-2 vs 1099 classificationPenalty ratesAll terms ›
Where Compono fits

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Common questions

Can an employee agree to waive overtime?

No. FLSA rights cannot be waived by agreement; unpaid overtime remains owed (plus liquidated damages) however willingly the hours were worked.

Is everyone paid a salary exempt?

No. Salary is one leg of the test. Without qualifying duties and the threshold salary level, a salaried employee is still owed overtime.

This page is general information, not legal advice. We check figures annually and update them on a best-efforts basis, but employment rules change and we cannot promise everything here is current or complete. Before you act on it, confirm the detail with the US Department of Labor (dol.gov) or your own adviser. Last reviewed July 2026.