One of the biggest points of confusion under the Fair Labor Standards Act (FLSA) is whether an employee is exempt or non-exempt. The answer matters—a lot—because it determines whether someone is entitled to overtime pay when they work more than 40 hours in a week.
Let’s break it down in simple terms.
What does “non-exempt” mean?
If an employee is non-exempt, it means the protections of the FLSA do apply. That includes:
- At least the federal minimum wage ($7.25/hour—higher in many states)
- Overtime pay at time-and-a-half for all hours over 40 in a workweek
Most employees fall into this category. Hourly workers, retail staff, restaurant servers, construction workers, and administrative support roles are usually non-exempt.
What does “exempt” mean?
If an employee is exempt, it means they are exempt from (not covered by) the FLSA’s overtime rules. Exempt employees don’t get time-and-a-half no matter how many hours they work in a week.
But here’s the catch: not everyone who earns a salary is automatically exempt. To qualify, employees must meet three tests:
- Salary basis test – They’re paid a fixed salary, not hourly.
- Salary level test – They earn at least the minimum salary set by law (currently $684 per week or $35,568 annually).
- Duties test – Their job duties fit into one of the exempt categories (executive, administrative, professional, certain computer/tech roles, or outside sales).
If all three boxes aren’t checked, they’re non-exempt—even if they’re salaried.
Examples that make it clearer
- Non-exempt example: A retail store cashier earns $15/hour. She works 45 hours in a week. The extra 5 hours must be paid at time-and-a-half ($22.50/hour).
- Exempt example: A marketing manager earns $60,000/year, makes hiring decisions, and directs a small team. Even if he works 50 hours, he doesn’t get overtime—he qualifies under the executive exemption.
- Tricky case: An office worker is paid $900/week on a salary basis, but her job mostly involves routine data entry with little decision-making authority. Even though her pay clears the salary threshold, her duties don’t meet the exemption tests—so she’s non-exempt and must be paid overtime.
Common mistakes employers make
- Confusing “salary” with “exempt.” Just paying a salary doesn’t make someone exempt—you still need to check the duties test.
- Job titles vs. actual work. Calling someone a “manager” doesn’t make them exempt if they’re not managing people or making decisions.
- Day rates or piece rates. Even if someone is paid per project or per day, they may still be non-exempt.
- Ignoring bonuses and commissions. These often must be included in the “regular rate” for overtime calculations.
- Misclassifying to avoid overtime. This is a hot button for the DOL—misclassification is one of their top enforcement priorities.
Why this matters
Getting exempt vs. non-exempt status wrong is expensive. Employers who misclassify employees often end up owing:
- Back wages for unpaid overtime
- Liquidated damages (doubling the back pay)
- Attorney’s fees and court costs
For a single employee, that can add up to thousands of dollars. For a group (a collective action), it can sink a business.
How to get it right
- Review each role – Don’t assume; look at the actual work done.
- Check the three tests – Salary basis, salary level, and duties.
- Audit regularly – Salary thresholds change, and roles evolve over time.
- Train your managers – They should know who is eligible for overtime and why.
- Document decisions – Keep notes on why you classified someone as exempt or non-exempt.
How Kubera HR Solutions can help
At Kubera HR Solutions, we help businesses audit their employee classifications so you can be confident that exempt and non-exempt roles are set up correctly. Our audits catch the small mistakes before they turn into expensive lawsuits or DOL investigations. If you want peace of mind—and a clear roadmap for compliance—our team can help.