Exempt vs. Non-Exempt

An FLSA classification determining whether an employee is entitled to overtime pay for hours worked beyond 40 per week.

Under the Fair Labor Standards Act (FLSA), every US employee is classified as either exempt or non-exempt from overtime requirements. Non-exempt employees must be paid at least 1.5 times their regular rate for every hour worked over 40 in a workweek. Exempt employees have no such requirement — employers can require them to work 50, 60, or 80 hours per week with no additional compensation beyond their salary. This single classification has enormous practical implications for how employees are paid and how much employers can extract from a given headcount.

Exempt status is not simply a matter of being salaried — a common misconception that benefits employers who mislabel workers. To qualify as exempt, employees must meet both a salary threshold (currently $684/week or $35,568/year as of the most recent federal standard, though this is periodically updated) and a duties test. The three most common exemptions are executive (managing two or more employees), administrative (non-manual work related to business operations, with discretion and independent judgment), and professional (work requiring advanced knowledge in a field of science or learning). Being called a 'manager' or 'supervisor' without actually meeting these criteria doesn't make you exempt.

Worker misclassification — calling non-exempt employees exempt to avoid paying overtime — is among the most common forms of wage theft and a major enforcement priority for the Department of Labor. It most frequently affects junior managers, assistant managers, 'lead' positions, and white-collar workers who are paid just above the salary threshold but perform largely non-exempt duties. If you regularly work over 40 hours and your job function is routine, closely supervised, or doesn't involve genuine managerial discretion, you may be misclassified.

From an employer's perspective, the exempt/non-exempt distinction also affects record-keeping requirements. Non-exempt employees must have their hours tracked accurately — employers are legally required to maintain time records. Exempt employees typically don't punch a clock. This asymmetry shapes how roles are structured and can create perverse incentives: some employers classify workers as exempt specifically to avoid the administrative burden of timekeeping rather than because the role genuinely qualifies.