FLSA status is one of those HR classifications that looks binary from a distance and gets messy up close. An employee is either exempt (no overtime) or non-exempt (entitled to overtime for hours over 40), but the determination runs through three technical tests and tangles with state law that sometimes goes further than federal. For 2026, federal status questions sit in an unusual place: the DOL's 2024 rule raising salary thresholds was blocked in court, the threshold reverted to the 2019 level, and several states continue to operate under higher thresholds than federal. Getting status right remains one of the highest-stakes compliance analyses HR runs.
The Three Tests That Determine FLSA Status For an employee to be FLSA-exempt under the most common white-collar exemptions, three things must be true. Salary test: the employee must earn at least the federal minimum threshold ($35,568 annually as of 2026). Salary-basis test: pay must be a predetermined weekly or monthly amount that doesn't fluctuate based on quality or quantity of work. Duties test: the employee's primary duties must fall within executive, administrative, professional, outside sales, or computer employee categories.
All three must hold. If any one fails, the exemption fails, and the employee becomes non-exempt and entitled to overtime . The test is the same at hire and continues throughout employment; status can shift if duties change.
What Exempt and Non-Exempt Actually Mean for Pay Non-exempt employees get time-and-a-half for hours worked over 40 in a workweek under federal law, and some states (California is the standout) require daily overtime on top. They also have to be paid for all hours worked, including work off the clock, and must be tracked with reliable timekeeping. Meal and rest break rules are generally governed by state law.
Exempt employees are paid a fixed salary regardless of hours. Docking exempt pay for partial-day absences or performance issues can break the salary-basis test and unintentionally destroy the exemption. Teams sometimes discover this mid-audit, and fixing it means paying back overtime for the entire look-back period.
Which Employees Are Most Commonly Misclassified? Mid-level operations and administrative roles, particularly coordinators, specialists, and analysts whose title suggests independence but whose actual duties are routine. Assistant managers in retail and hospitality who lack genuine authority. IT support roles that don't meet the computer-employee duties test. When in doubt, document the primary duties actually performed (not the job description), and compare against the DOL's exemption tests .
State-Law Variations That Override Federal California, New York, Washington, Colorado, Alaska, and Maine set salary thresholds significantly higher than federal, and several apply stricter duties tests. California's computer-employee exemption salary threshold is over $110,000 in 2026; the federal equivalent is roughly half that. An employee exempt under federal law may be non-exempt under state law.
Multi-state employers have to run the FLSA analysis state by state for each affected role. Running a single federal-only analysis misses most of the state-specific liability and is one of the most common root causes of wage-and-hour class actions.
Maintaining FLSA Status Accuracy Through Changes Audit every exempt role annually. When a role changes duties (reorganization, scope expansion, new responsibilities added), re-run the test before the next pay cycle. Document what the primary duties are, how much time they occupy, and why they meet (or don't meet) the exemption category. A defensible paper trail is the single best asset when a classification gets challenged.
The DOL publishes current exemption guidance, salary thresholds, and duties tests at dol.gov/agencies/whd/overtime . For employees already classified as exempt or held in compensation -grade roles under review, annual reviews reduce the likelihood of a surprise finding during a later audit or lawsuit.
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