TL;DR: Putting someone on salary does not automatically make them exempt from overtime. The Fair Labor Standards Act requires two separate tests to be met at the same time: a salary threshold, currently $684 per week or $35,568 per year, and a duties test that looks at what the employee actually does day to day. A salaried employee who fails either test is still owed overtime, regardless of job title. Misclassifying someone as exempt can trigger back pay, liquidated damages, and a Department of Labor investigation, so a periodic review of every exempt employee is worth the time.
If you have salaried employees and have never stopped to ask whether they actually qualify for the overtime exemption, this is worth a closer look, because salary and overtime exemption are not the same thing. The Department of Labor has a very specific test for telling them apart, and most employers assume that putting someone on salary means overtime stops being a concern. That assumption is one of the most common, and most expensive, wage and hour mistakes a small business can make.
Salary Does Not Automatically Mean Exempt
The Fair Labor Standards Act, the federal law that governs overtime, sets out a two part test for exemption, and an employee has to meet both parts to qualify. Title and pay structure alone are not enough. A business can call someone a manager, pay them a steady salary, and still owe them overtime if the underlying job does not meet the federal definition of exempt work.
The Federal Salary Threshold, Explained
The first part of the test is a salary threshold. As of 2026, the federal minimum salary for overtime exemption is $684 per week, or roughly $35,568 per year. This figure was restored to the 2019 level in May 2026 after a higher 2024 rule was struck down in court, so $684 per week is the number currently in effect at the federal level. Any salaried employee earning below that amount is entitled to overtime pay, period, with no duties test required and no exceptions for job title.
The FLSA Duties Test
Even if an employee clears the salary threshold, their actual job function has to qualify as executive, administrative, or professional work under the FLSA’s definitions. A salaried customer service representative or office coordinator may not meet the duties test, which means they are entitled to overtime regardless of what their offer letter says. The duties test looks at what the person actually does most of the time, not the title on their business card.
Why Employers Get This Wrong
Both tests have to be met, the salary threshold and the duties test, not one or the other. This is where most employers get tripped up. They see a salaried employee and stop asking questions. The Department of Labor does not stop there, and neither should you. A high salary does not excuse a job that fails the duties test, and a job that would otherwise qualify does not excuse a salary below the federal threshold.
The Cost of Misclassifying an Employee
Getting this wrong is expensive. Misclassifying an employee as exempt triggers back overtime pay, liquidated damages equal to the amount owed, and potential exposure to a Department of Labor investigation. Multiply that across several employees over two or three years, and the liability adds up quickly. This is one of those wage and hour issues where the cost of ignoring it grows every pay period it goes unaddressed.
How to Review Your Exempt Employees
There are three practical steps here. First, pull your exempt employee list. Every salaried employee currently classified as overtime exempt should be on it, and if there is no formal list, building one is the first action item. Second, run the two part test on each person: does that employee clear the $684 per week salary threshold, and does their actual day to day work, not their title, qualify as executive, administrative, or professional under the FLSA’s definitions. Both answers need to be yes. Third, flag and fix the gaps. Any employee who fails either part of the test should be reclassified as non-exempt and put on overtime tracking immediately. A proactive correction is always less costly than a reactive one.
A Quick Note on State Rules and Getting Help
Several states set their own salary thresholds for overtime exemption that are higher than the federal minimum, and those state rules apply whenever they are more protective of the employee than federal law. This article covers general federal concepts and is meant as compliance information, not legal advice. If you are not sure how to run this analysis, or have employees who fall into a gray area, that is exactly the kind of review worth doing with help before it becomes a Department of Labor problem.
Frequently Asked Questions
Does putting an employee on salary automatically make them exempt from overtime?
No. Salary is only one part of a two part test under the Fair Labor Standards Act. An employee also has to pass a duties test based on their actual job function. A salaried employee who fails either part is still entitled to overtime pay, regardless of job title or pay structure.
What is the current federal salary threshold for overtime exemption?
As of 2026, the federal minimum salary for exemption is $684 per week, or roughly $35,568 per year. Any salaried employee earning below that amount is entitled to overtime with no duties test required. Some states set higher thresholds, so the state number applies if it is more protective of the employee than the federal minimum.
What is the FLSA duties test?
The duties test looks at whether an employee’s actual day to day job function qualifies as executive, administrative, or professional work under the Fair Labor Standards Act’s definitions. It examines what the person actually does most of the time, not their job title, and an employee who does not meet this test is entitled to overtime even if they clear the salary threshold.
What happens if an employee is misclassified as exempt?
Misclassifying an employee as exempt can trigger back overtime pay, liquidated damages equal to the amount owed, and a potential Department of Labor investigation. This exposure compounds across multiple employees and multiple years, since back pay claims can typically reach back two to three years depending on whether the violation was willful.
How often should I review exempt employee classifications?
A periodic review, at least once a year or whenever a role’s responsibilities change significantly, helps catch classification drift before it becomes expensive. Pull the exempt employee list, run the two part test on each person, and reclassify anyone who fails either the salary threshold or the duties test.
A Job Title Doesn’t Determine Overtime Eligibility
A salary threshold and a duties test both have to be met, and skipping either one is how most exempt classification mistakes happen. Reviewing every exempt employee against both parts of the test on a regular basis costs far less than the back pay, damages, and investigation exposure that come from getting it wrong. guHRoo helps Georgia and Southeast US employers review exempt classifications before a gray area becomes a liability.
If you are not sure how to run that analysis, or have employees who fall into a gray area, reach out to guHRoo. Exempt classification audits are exactly the kind of review worth working through before it becomes a Department of Labor problem.
