Exempt vs non-exempt employees: how to classify a role before you hire

An exempt employee is one the Fair Labor Standards Act does not require you to pay overtime, because the job passes three tests: a fixed salary, at least $684 a week ($35,568 a year), and a primary duty that fits one of the exemptions for executive, administrative, professional, computer or outside sales work. Everyone else is non-exempt and must be paid time and a half for hours over 40 in a workweek. As of October 2026, $684 is the federal level: the 2024 rule that would have raised it was vacated, the appeals were dismissed in May 2026, and the Department of Labor restored the 2019 text. California, New York, Washington and Colorado set higher salary floors.

Classify the role before you write the posting or the offer, because the answer drives the pay structure you advertise. For the separate question of employee versus contractor, see worker misclassification.

What happened to the 2024 overtime rule?

The DOL's April 2024 rule would have raised the salary level to $844 a week on July 1, 2024 and to $1,128 a week on January 1, 2025. On November 15, 2024 the U.S. District Court for the Eastern District of Texas vacated it in Texas v. U.S. Department of Labor, 756 F. Supp. 3d 361, and the Northern District of Texas did the same in Flint Avenue, LLC v. U.S. Department of Labor on December 30, 2024. According to the DOL, the Fifth Circuit dismissed the appeals in those cases on May 5 and 7, 2026, leaving the vacatur final. On May 15, 2026 the DOL published a technical rule removing the vacated text and "republishing in its place the regulatory text as it existed prior to the effective date of that rule" (91 FR 27833). The DOL's salary levels page lists $684 a week and $107,432 for highly compensated employees. No new federal increase had been proposed as of October 2026.

What are the three tests for exempt status?

"Primary duty" means "the principal, main, major or most important duty that the employee performs." Time is a guide, not the test: employees "who spend more than 50 percent of their time performing exempt work will generally satisfy the primary duty requirement," but the regulation does not require it (29 CFR 541.700). Salary basis also means paying the full salary for any week in which the employee does any work, and an employee is not paid on a salary basis if pay is docked "for absences occasioned by the employer or by the operating requirements of the business" (541.602(a)(2)).

Which duties tests apply to which roles?

The professional exemption's salary carve-out does not cover most of healthcare: it "does not apply to pharmacists, nurses, therapists, technologists" and similar professions (29 CFR 541.600(e)). Inside sales roles cannot use the outside sales exemption, because the work is done at the employer's place of business.

An example close to home: recruiting roles

The administrative exemption's examples include one written about recruiting. "Human resources managers who formulate, interpret or implement employment policies" generally qualify; "personnel clerks who 'screen' applicants to obtain data regarding their minimum qualifications and fitness for employment generally do not," because the standards and the hiring decision are set by others (29 CFR 541.203(e)). A recruiting coordinator who schedules interviews and checks résumés against a checklist looks like the second; a talent acquisition manager who sets hiring policy looks like the first. Most recruiter roles sit between them, so test each one against the actual duties. Our recruiter job description template shows how to describe duties clearly enough to make that call.

Which states set higher salary thresholds?

Where federal and state rules differ, the employer must meet the one more protective of the employee; New York's Department of Labor says employers covered by both "must pay employees the higher rate." These four are examples, not a complete list, and states also have their own duties tests, which can differ from the federal ones.

How do you classify a role before posting it?

1. Write down the primary duty. What will this person spend most of their time doing, and what is the most important thing they do?
2. Match it to an exemption, word for word. Use the regulation text in the table above, not the job title or what similar companies do.
3. Check the salary for the work location. Compare the planned base salary with the federal level and the state level where the employee will work, including remote hires in other states.
4. Decide, and record why. Keep a short note with the duties, the exemption relied on and the salary check.
5. Put the status in the posting and offer. "Exempt (salaried)" or "Non-exempt (hourly, overtime eligible)"; our offer letter template has a line for it. In pay transparency states, the posted range must fit the classification; see how to set salary ranges.
6. Re-check when the job changes. A promotion, a new state or a January threshold increase can change the answer.

What changes when a new hire is non-exempt?

Non-exempt does not mean hourly. You can pay a non-exempt employee a salary, but overtime is still owed: the regulation converts the salary to a "regular hourly rate of pay, on which time and a half must be paid," by dividing it by the hours it is meant to cover (29 CFR 778.113). For any workweek over 40 hours the employee must receive "not less than one and one-half times the regular rate" (29 U.S.C. 207(a)(1)), and the employer must record "hours worked each workday and total hours worked each workweek" (29 CFR 516.2(a)(7)).

For hiring teams that means a few practical things:

• Say in the offer how hours are tracked and how overtime is approved, so the new hire is not surprised.
• Count required onboarding and training as working time unless all four conditions in 29 CFR 785.27 are met, including that attendance is outside regular hours and "in fact voluntary"; set a rule for after-hours messages.
• When a non-exempt employee interviews for an exempt role internally, the new classification starts with the new job, not the offer date.
• Budget for overtime in the pay range you post rather than setting a salary just above a threshold to avoid it.

What does getting it wrong cost?

An employer that fails to pay overtime owes "unpaid overtime compensation ... and in an additional equal amount as liquidated damages" (29 U.S.C. 216(b)). Claims reach back two years, or three for willful violations (29 U.S.C. 255(a)). State laws add their own remedies, and one misclassified role usually means a whole group of employees in that role is affected.