Exempt or Non-Exempt? Applying the FLSA's Three-Part Test in 2026
A position is only exempt from overtime if it passes the salary-basis, salary-level, and duties tests. Here's how to work through all three correctly.
By Nora Ellison · Senior HR Compliance Writer
Reviewed by theComplianceToolsLibrary Editorial Team · · 6 min read
Misclassifying an employee as exempt is one of the most expensive wage-and-hour mistakes an employer can make — back overtime, liquidated damages, and attorney's fees add up quickly. Yet the rule itself is simpler than it looks: a job is exempt from federal overtime only if it clears three separate tests.
This guide walks through the salary-basis, salary-level, and duties tests under the Fair Labor Standards Act (FLSA) so you can classify a role with confidence, then check your work in the FLSA Overtime Exemption Checker.
The three tests, in order
To qualify for one of the FLSA's "white-collar" exemptions, a position must satisfy all three of the following. Failing any one makes the employee non-exempt and therefore owed overtime at 1.5× their regular rate for hours over 40 in a workweek.
- Salary basis: the employee is paid a predetermined, guaranteed amount that isn't reduced because of the quality or quantity of work.
- Salary level: that guaranteed salary meets the federal threshold — currently $684 per week ($35,568 per year).
- Duties: the role's primary duties match an exemption category (executive, administrative, learned or creative professional, computer, or outside sales).
Why the salary number keeps changing
The U.S. Department of Labor issued a 2024 rule that would have raised the standard salary level in two steps, but a federal court vacated that rule in late 2024. As a result, the threshold reverted to the 2019 level of $684 per week, which is what applies nationwide today.
Because the figure has moved recently — and could move again through future rulemaking — treat the salary level as something to re-verify rather than memorize. The duties test, by contrast, has been far more stable.
The duties test is where most errors happen
A common myth is that paying someone a salary automatically makes them exempt. It doesn't. The duties test asks what the employee actually does, not their title or how they're paid. An "office manager" who spends most of the week on routine clerical work may well be non-exempt despite the title.
Document the primary duties you relied on. If a role is close to the line, the safer call is to classify it as non-exempt and pay overtime.
Don't forget stricter state rules
Several states — including California, New York, and Washington — set higher salary thresholds and tighter duties tests than the federal floor. When state and federal rules differ, you must apply whichever standard is more protective of the employee.
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Frequently asked questions
Does paying a salary make an employee exempt from overtime?
No. Salary is only one of three requirements. The employee must also meet the federal salary level and have primary duties that fit an exemption category. A salaried employee whose duties don't qualify is still owed overtime.
What is the federal salary threshold for exemption in 2026?
$684 per week, or $35,568 per year. A 2024 Department of Labor rule that raised this amount was vacated by a federal court, so the 2019 level remains in effect.
What happens if we misclassify an employee as exempt?
The employer can owe unpaid back overtime, an equal amount in liquidated damages, and the employee's attorney's fees. Penalties can reach back two years (three for willful violations).