Overtime Rules Explained: Exempt vs. Non-Exempt and the FLSA Tests

The Core Rule: Time and a Half Over Forty Hours

Federal overtime law comes from the Fair Labor Standards Act (FLSA), and its core rule is simple: covered, non-exempt employees must be paid at least 1.5 times their regular rate for every hour worked beyond 40 in a workweek. The workweek is a fixed, recurring 168-hour period — it does not have to align with the calendar week, but the employer must define it and cannot average two weeks together to avoid overtime.

The phrase doing the heavy lifting is 'regular rate.' It is not just base hourly pay — it must include most nondiscretionary bonuses, shift differentials, and commissions, spread across hours worked. That is why an employee's true overtime rate is often higher than 1.5x their stated hourly wage, and why miscalculated overtime is one of the most common (and expensive) payroll errors.

Exempt vs. Non-Exempt: The Distinction That Decides Everything

Whether you get overtime depends entirely on whether you are classified as exempt or non-exempt. Non-exempt employees are entitled to overtime; exempt employees are not. A common misconception is that being paid a salary makes you exempt. It does not — salary is only one of several conditions, and salaried workers can absolutely be non-exempt and owed overtime.

To be legally exempt from overtime, an employee generally must satisfy all three of the following: they must be paid on a salary basis (a fixed amount that doesn't fluctuate with hours), that salary must meet or exceed the federal threshold, and their actual job duties must fall within a recognized exemption category. Missing any one test means the employee is non-exempt regardless of title.

The Salary Threshold and Why It Keeps Changing

The FLSA sets a minimum salary below which almost no one can be classified as exempt, no matter their duties. This threshold has been raised repeatedly and is periodically litigated, so the exact figure shifts — the practical point is that if a salaried worker's pay falls below the current threshold, they are automatically non-exempt and owed overtime for hours past 40.

The Duties Tests: What You Actually Do, Not Your Title

Even a high salary does not create an exemption on its own — the employee's real duties must fit one of the FLSA's white-collar exemption categories. Job titles are irrelevant; the Department of Labor looks at day-to-day responsibilities.

• Executive: primary duty is managing the enterprise or a department, regularly directing at least two full-time employees, with authority over hiring and firing.
• Administrative: primary duty is office or non-manual work directly related to management or business operations, exercising independent judgment on significant matters.
• Professional: work requiring advanced knowledge in a field of science or learning, typically from prolonged specialized instruction (learned professionals) or creative/artistic fields.
• Computer employees and outside sales have their own specific tests.
• Highly compensated employees face a relaxed duties test but a much higher total-compensation requirement.

This is where misclassification lawsuits concentrate. Calling a worker an 'assistant manager' who spends 90% of their time doing the same tasks as hourly staff does not make them exempt, and back-pay claims for such misclassification can span years.

What Counts as Hours Worked

Overtime disputes often turn on which hours count. Under the FLSA, compensable time includes work performed off the clock that the employer knew or should have known about, short rest breaks (typically under 20 minutes), required travel between job sites during the day, and time spent on mandatory training. It generally excludes a bona fide meal break of 30+ minutes when the employee is fully relieved of duty, and ordinary commuting.

In the remote and always-on era, answering emails after hours, booting up systems before a shift ('donning and doffing' equivalents), and being on-call under tight constraints can all count. Non-exempt remote workers should track every compensable minute, and employers should have clear policies to avoid unrecorded work becoming an overtime liability.

How to Check Whether You're Owed Overtime

1. Determine your classification: is 'exempt' or 'non-exempt' stated in your offer or handbook?
2. If salaried, compare your salary to the current federal (and your state's) exempt threshold.
3. Assess your real duties against the exemption categories — not your job title.
4. Recalculate your regular rate to include nondiscretionary bonuses and differentials before applying 1.5x.
5. Keep your own record of hours; if numbers don't add up, raise it with payroll in writing and, if unresolved, contact your state labor agency or the federal Wage and Hour Division.