Is a salaried person exempt?

The concept that simply receiving a fixed salary automatically exempts an employee from overtime pay rules is one of the most pervasive misunderstandings in the modern workplace. ^[3][5][10] Many people operate under the assumption that if they are not paid hourly, the rules governing overtime—typically time-and-a-half for hours worked beyond 40 in a workweek—simply do not apply to them. ^[4][9] This is frequently incorrect. Whether a salaried worker must receive overtime is not determined by how they are paid (salaried versus hourly), but rather by whether they meet the specific criteria established by the Fair Labor Standards Act (FLSA) at the federal level, and sometimes stricter state laws. ^[1][2][6]

# Pay Structure

Understanding the terminology is the first step in navigating this landscape. A salaried employee receives a predetermined amount of money on a regular basis, usually weekly or bi-weekly, regardless of the number of hours worked in that period. ^[10] This contrasts sharply with hourly employees, whose pay fluctuates based on the exact time they clock in and out. ^[1] However, the designation of "salaried" only describes the method of payment, not the legal status regarding overtime entitlement. ^[9]

The crucial legal distinction under the FLSA is between exempt and non-exempt employees. ^[1][5] An exempt employee is legally excused from the minimum wage and overtime provisions of the FLSA. ^[2][7] A non-exempt employee, conversely, is entitled to overtime compensation for all hours worked over 40 in a workweek, even if they are paid on a salary basis. ^[4][5][6] This "non-exempt salaried" category is where confusion most often arises. ^[5]

# Three Tests

For an employee to qualify as exempt from federal overtime requirements, they must satisfy three simultaneous tests: the salary level test, the salary basis test, and the duties test. ^[2][7] If even one of these requirements is not met, the employee is legally considered non-exempt and is entitled to overtime pay. ^[2][8]

# Salary Level

The salary level test requires that the employee be paid a predetermined minimum amount per workweek. ^[2] This minimum threshold is established by the Department of Labor (DOL) and is subject to change periodically through regulatory updates. ^[2] For an employee to be considered exempt, their actual salary must meet or exceed this specified level. ^[7]

It is important to note that meeting the salary minimum is necessary but not sufficient for exemption. ^[8] An employee could earn $150,000 a year, which is well above the federal minimum salary threshold, but if their job duties do not align with an exempt category, they must still be paid overtime. ^[3]

# Salary Basis

The salary basis test dictates how the salary must be paid. Under this rule, an employee must receive their full predetermined salary for any workweek in which any work is performed, regardless of the quantity or quality of the work done. ^[2][7] This means that an employer generally cannot make deductions from the salary because the employee worked fewer hours than scheduled. ^[2]

There are very limited exceptions that permit deductions without losing the salary basis protection. These exceptions usually involve absences for personal reasons, such as taking full-day personal leave or sick leave when accrued leave banks are exhausted, or for penalties imposed for serious safety rule infractions. ^[2] If an employer deducts pay for partial-day absences or disciplinary reasons outside of these narrow statutory exceptions, the employee may lose their exempt status for that pay period and become entitled to overtime for all hours worked that period. ^[7]

# Job Duties

Perhaps the most complex aspect is the duties test. ^[7] Even if the pay level and method are correct, the employee's primary job functions must fall squarely within one of the recognized FLSA exemption categories: Executive, Administrative, Professional, Computer Employee, or Outside Sales. ^[2][8]

• Executive Exemption: This typically applies to employees who manage the enterprise or a recognized department or subdivision, customarily direct the work of two or more other full-time employees, and have the authority to hire or fire (or whose recommendations carry significant weight). ^[8]
• Administrative Exemption: This requires the employee to perform office or non-manual work directly related to the management or general business operations of the employer or the employer’s customers. Crucially, they must also customarily exercise discretion and independent judgment with respect to matters of significance. ^[2][8] This is often where ambiguity arises; simply having an administrative title does not grant the exemption if the actual work performed is routine or technical. ^[8]
• Professional Exemption: This applies to those engaged in work requiring advanced knowledge, customarily acquired through a prolonged course of specialized intellectual instruction, such as law or medicine, or those in creative professions or teaching. ^[8]

The focus here is on the primary duty of the job. If an employee spends more than 50% of their time performing tasks that meet the requirements of an exempt classification, they are generally considered exempt, assuming the salary tests are also met. ^[8]

Why would someone be salaried non-exempt?

# Non-Exempt Salaried Workers

The reality for many salaried employees is that they fall into the non-exempt category. ^[9] These individuals are paid a fixed salary—perhaps $60,000 per year—but are still legally owed overtime pay for any hours worked past 40 in a week. ^[5][6]

Consider a scenario where an analyst is paid $70,000 annually on a salary basis. If the federal salary threshold is currently, say,$684 per week (which equals $35,568 annually), this analyst meets the level test. If they are paid correctly every week, they meet the basis test. However, if their primary duty is detailed data manipulation and report generation, which does not involve significant independent judgment on management matters, they likely fail the duties test for the Administrative exemption. ^[3][8] Therefore, if this analyst works 50 hours one week, they are owed five hours of overtime pay on top of their regular weekly salary amount. ^[4] The salary covers the first 40 hours, and the overtime premium is paid in addition to that salary portion for the extra hours. ^[5]

This classification requires meticulous tracking of hours worked, which can feel counterintuitive to employees accustomed to the "work until the job is done" mentality often associated with salaried roles. ^[6] Employers must ensure that non-exempt salaried staff accurately record all time worked, including time spent in meetings, training, or answering emails outside of standard business hours, to remain compliant. ^[1]

# State Nuances

While the FLSA provides the federal floor for wage and hour laws, individual states possess the authority to establish their own, often stricter, standards. ^[1] This means an employee might be exempt under federal law but non-exempt under their state's regulations, or vice versa, though most states align closely with the FLSA on the core definitions. ^[6]

In some jurisdictions, the required minimum salary threshold for exemption is higher than the federal minimum. ^[1][6] If a state mandates a $900 weekly salary minimum for exemption, but the federal minimum is$684, an employee earning $800 per week would be non-exempt federally but still exempt under that specific state law if they meet the duties test, or they might be non-exempt under both if their salary is below the higher state threshold. ^[6] Employers operating across state lines must always apply the standard that provides the greater benefit to the employee. ^[1]

Does non-exempt mean salaried?

# Employer Risk Assessment

The distinction between exempt and non-exempt status is not merely academic; it carries significant financial and legal risk for the employer. ^[5] Misclassifying an employee as exempt when they should be non-exempt can lead to substantial liability, including the payment of back wages for all unpaid overtime, often stretching back two or three years, potentially doubled by liquidated damages, plus associated legal fees. ^[1][7]

When reviewing roles for compliance, management must look past job titles and focus intensely on the day-to-day realities of the position. A simple way to test for the administrative exemption's requirement for independent judgment is to ask: Does this person have the authority to make decisions that significantly affect the business's operations or financial standing without constant direct supervision, or are they mainly following established procedures? If the answer leans toward following procedures, the position likely leans toward non-exempt status, even if it requires high skill. ^[8]

For an employee seeking clarity on their own standing, especially when paid a salary, a practical self-audit involves two steps. First, check your pay stub and employment contract: does it guarantee the full weekly amount even if you leave early on a Friday? If not, you might already be failing the salary basis test. ^[2] Second, review your last month's time log against the job description: If you consistently record over 40 hours, and your primary tasks involve execution rather than high-level strategic decision-making or direct supervision of others, you should inquire with HR about your FLSA classification, as you may be owed compensation. ^[3][4] Understanding that the salary is a guarantee of pay for a threshold of work, not a waiver of overtime rights, fundamentally changes how salaried workers should view their time tracking responsibilities. ^[9]