Exempt vs Non-Exempt: How to Classify Employees

The three tests every exempt employee must pass

Exempt means the employee is not owed overtime. Non-exempt means they are owed time and a half for hours over 40 in a workweek (see overtime rules). For the standard white-collar exemptions, the Department of Labor (DOL) requires all three of these:

Salary basis: the person gets a predetermined, fixed amount each pay period (weekly or less often) that is not cut because of the quality or quantity of their work.
Salary level: that salary is at least $684 a week, which is $35,568 a year for a full-year worker.
Duties: the person's primary duty, meaning their main and most important work, matches one of the exemptions described below.

Job titles and offer letters do not decide this. A "Marketing Manager" who manages nobody and follows set procedures may well be non-exempt. Paying someone a salary does not make them exempt either: a salaried non-exempt employee still has to track hours and get overtime.

A few groups follow different rules. Outside sales employees have no salary test, and the salary tests also do not apply to doctors, lawyers and teachers.

The federal salary threshold in 2026: $684 a week

DOL's current salary level for the executive, administrative and professional exemptions is $684 per week ($35,568 a year). For highly compensated employees, the total annual pay requirement is $107,432, of which at least $684 a week must be paid as salary. These levels come from a 2019 rule that took effect on January 1, 2020.

You may have read about higher numbers ($844 a week from July 2024, then $1,128 a week from January 2025). Those came from a 2024 DOL rule that federal courts in Texas vacated in November and December 2024. The appeals were dismissed in May 2026, and DOL published a technical amendment on May 15, 2026 putting the 2019 text back into the regulations. The $684 level is the one DOL enforces.

The duties tests, exemption by exemption

Federal white-collar exemptions (29 CFR Part 541)
Exemption	Primary duty must be	Pay test
Executive	Managing the business or a recognized department. Must regularly direct the work of 2 or more full-time employees (or the equivalent) and have authority to hire or fire, or have their hiring and firing recommendations given particular weight.	Salary of at least $684 a week
Administrative	Office or non-manual work directly related to the management or general business operations of the employer or its customers, including the exercise of discretion and independent judgment on significant matters.	Salary of at least $684 a week
Learned professional	Work requiring advanced knowledge in a field of science or learning, usually gained through a prolonged course of specialized study, that is mainly intellectual and calls for consistent judgment.	Salary of at least $684 a week
Creative professional	Work requiring invention, imagination, originality or talent in a recognized artistic or creative field.	Salary of at least $684 a week
Computer employee	Working as a systems analyst, programmer, software engineer or similarly skilled worker: systems analysis, or designing, developing, testing or modifying computer systems or programs.	Salary of at least $684 a week, or at least $27.63 an hour
Outside sales	Making sales or getting orders or contracts, while customarily and regularly working away from the employer's place of business.	No salary test

The computer employee exemption is the one most tech companies lean on, and it has limits. It does not cover people who make or repair computer hardware, and it does not cover people who simply use computers a lot in their work. Help desk and IT support roles need a careful look at what the person actually does all day.

States with a higher salary floor

Federal and state law both apply, so in a state with a higher salary floor the state number is the one you have to meet. These are the 2026 figures published by each state:

State minimum salary for exempt employees, 2026
State	Exempt salary minimum	Computer professionals
California	At least two times the state minimum wage for full-time work. With the 2026 minimum wage of $16.90 an hour, that is $70,304 a year (2 x $16.90 x 2,080 hours).	At least $58.85 an hour, or $10,214.44 a month ($122,573.13 a year), from January 1, 2026
New York	Executive and administrative employees: $1,275.00 a week in New York City, Nassau, Suffolk and Westchester counties; $1,199.10 a week in the rest of the state, from January 1, 2026	No separate rate listed by the state
Washington	$1,541.70 a week ($80,168.40 a year) in 2026	$59.96 an hour in 2026 (3.5 times the state minimum wage)
Colorado	$57,784 a year in salary for executive, administrative and professional employees in 2026	Some computer professionals are exempt under separate rules

These numbers usually rise every January, so re-check salaried employees near the line each year. Other states can also set their own rules, so check your state labor department when you hire somewhere new (see hiring employees in another state).

Deductions that can cost you the exemption

An exempt employee must get their full salary for any week in which they do any work. DOL allows deductions in a short list of cases, including:

Full-day absences for personal reasons other than sickness or disability.
Full-day absences for sickness under a bona fide sick leave plan.
Offsets for jury duty or witness pay, or military pay.
Penalties for breaking safety rules of major significance.
Unpaid disciplinary suspensions of one or more full days for workplace conduct violations.

Docking an exempt employee for a partial day, or because work was slow, is the classic mistake. An actual practice of improper deductions can mean losing the exemption for everyone in that job class. Isolated or accidental deductions do not cause that loss if you pay the employee back.

How to classify a new role, step by step

Write down the role's real primary duty, not the title. Ask the hiring manager what the person will spend most of their time doing.
Match it against the duties table above. If no exemption fits cleanly, the role is non-exempt.
Check the pay: at least $684 a week federally, and at least the state minimum where the person works.
Confirm you will pay a true fixed salary with no partial-day docking.
Record the classification and the reason on the employee record, and revisit it when duties, pay or the state threshold change.

DOL lists misapplying the executive and administrative exemptions as a typical problem at new businesses, and back overtime adds up fast. When a role is borderline, treat it as non-exempt or get advice before the offer goes out. A similar question comes up with contractors vs employees.

Common questions

Is the federal exempt salary threshold $1,128 a week?

No. The $1,128 level came from a 2024 DOL rule that federal courts vacated, and DOL restored the 2019 rule text in May 2026. The federal level is $684 a week ($35,568 a year).

Can I pay a non-exempt employee a salary?

Yes. Salary is a pay method, not a classification. A salaried non-exempt employee still needs their hours tracked and must get overtime for hours over 40 in a workweek.

Are software engineers exempt?

Often, under the computer employee exemption, if their primary duty is systems analysis or designing, developing, testing or modifying software, and they earn at least $684 a week in salary or $27.63 an hour. California and Washington set higher pay floors for computer professionals.

What is the highly compensated employee test?

Employees paid at least $107,432 a year in total, including at least $684 a week in salary, can be exempt under a lighter duties test if they customarily perform at least one exempt executive, administrative or professional duty.

How MambaHR handles this

MambaHR keeps your employee records and answers federal and state employment-law questions with the law cited, including which salary floor applies where someone works. When a role sits close to a salary line or the duties test is unclear, it goes to a person to decide, and every change is logged.

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Sources

Last reviewed October 2, 2026. This page is general information, not legal advice. Laws change and exceptions apply, so check the sources above or an employment lawyer before you act on a specific case.