What Is an Exempt Employee? An Updated Guide for 2025

What is an exempt employee? If you’re searching for an answer to this question, you’re likely trying to understand the employment system in the US and whether you fall under the Fair Labor Standards Act (FLSA) or not. As complex as it might feel at first glance, it’s quite simple to determine who qualifies as exempt and who doesn’t.

The employee classification rules make it easier to clarify the conditions of employment, particularly for non-exempt employees and the wages and other guarantees that come with it. Before you get started with your first or next job, it’s in your best interest to understand non-exempt employee rights and the safeguards charted out by the Department of Labor (DOL). 

Let’s explore the difference between exempt and non-exempt employees.

Working as exempt or non-exempt employees, there are advantages to either sides depending on your circumstances. (Image: Pexels)

What Is an Exempt Employee?

To understand who qualifies as exempt, we first need to understand what an exempt worker is. An exempt employee does not qualify for the benefits or fall under the regulations provided by the FLSA. These employees typically earn a salary, not an hourly wage, and are paid above the threshold set for that period. These salaries also do not get lowered due to the quality or quantity of their work. 

When we say “exempt” it means that these employees are exempt from being considered under the minimum wage and overtime pay regulations. It is also important to know that these exemption criteria primarily apply to employees in executive, administrative, and professional (EAP) roles.

Who Sets the Salary Threshold for Qualifying as an Exempt Employee?

The U.S. Department of Labor sets the salary threshold for determining who qualifies as an exempt employee. The threshold is reviewed regularly to determine if it falls in line with the economic conditions of the time and if it needs to be changed or updated.

When was the Salary Threshold for Exempt-Employees Last Changed?

The DOL last issued a new rule on April 26, 2024, to update and raise the minimum salary threshold required for these exemptions but a U.S. District Court in the Eastern District of Texas vacated the rule on November 15, 2024. This means the rule is no longer in effect and we operate by the previous rule set in 2019.

What Is the Minimum Salary Level for Exempt Employees in 2025?

As of March 2025, the minimum salary level for exemption is $35,568 per year or $684 per week. This means that employees who earn higher than this number do not have to be paid for overtime work unless the employer wants to compensate them in some alternate way. The threshold will be adjusted every three years after the next update on July 1, 2027. 

The DOL proposal in 2024 had attempted to raise the threshold to $43,888 ($844 per week) on July 1, 2024, with a successive increase on January 1, 2025, to $58,656 ($1,128 per week), but the rule was negated by a district court in Texas.

Minimum Salary for Exempt Employees Depending on State Laws

The regulations for the FLSA are determined by the central government, but states have the option of setting their own rules when it comes to determining who qualifies as exempt. While the guidelines don’t change, the qualifying criteria can be slightly different. A few states in the US have a higher threshold for determining the minimum salary for an exempt employee. For example:

• California: $68,640 per year ($1,320 per week)
• New York: $60,405.80 per year ($1,161.65 per week) for most of the state following the increase in minimum wage and $64,350 per year ($1,237.50 per week) in New York City, Long Island, and Westchester County
• Colorado: $56,485 per year ($1,086.25 per week)
• Alaska:$49,545.60 per year ($952.80 per week)
• Washington: $69,305.60 per year ($1,332.80 per week) for employers with 1-50 employees and $77,968.80 per year ($1,499.40 per week) for employers with 51 or more employees 
• Maine: $43,951 per year ($845.21 per week)

What Is a Non-exempt Employee?

We’ve gone over the details of what an exempt employee is, but we should also delve into the definition of a non-exempt employee. Non-exempt employees are typically paid an hourly wage that is less than the salary threshold we just discussed for exempt employees. 

They are entitled to the protections under the FLSA, and any violations of the regulations can open employers up to legal action from employees. The federal minimum wage set by the FLSA is used to ensure all workers are provided with a basic wage that doesn’t fall below the acceptable standard. 

Many states like California and New York set their own minimum wage requirements which are higher than the base wage promised by the FLSA. These non-exempt workers are also supported by the overtime regulations that supplement their earnings for additional hours worked.

What Is The FLSA Overtime Rule?

The Fair Labor Standards Act (FLSA) determines when and how an employer should pay their non-exempt employees for overtime work. According to the rule, employers must pay employees a rate of at least one and a half times their regular pay rate for any hours worked beyond 40 in a single workweek. 

Employers need to maintain clear records of the employees’ working hours and the number of hours they work in addition to the contracted 40 hours. This data should be used to correctly calculate how much is owed to the employees when the pay is distributed.

How Being Non-Exempt Could Benefit You

For the most part, it is seen as preferable to be an exempt employee as they tend to have a more steady stream of income that is considerably higher than the minimum wages guaranteed by the FLSA. In general, the large number of workers who work corporate jobs, in tech fields, as doctors or other professionals tend to rely on their salaried work and the benefits provided by the employer for being a full-time salaried worker.

This does not mean that being non-exempt is a terrible thing. The employee classification rules don’t just differentiate between exempt vs non-exempt employees, but also provide some support for the latter to ensure they are not taken advantage of. For example:

• Overtime pay is the best benefit of non-exempt work as it ensures you are paid higher than the regular wage for the hours you work in addition to the regular workweek. Many exempt workers may work beyond their contracted hours but don’t see any reward for it
• Clear work-life balance as workers can log out without any expectation or working extra unless the employer is willing to pay for it
• More flexibility is often available in jobs with non-exempt employee rights
• More regular access to pay as wage workers are often paid on a weekly basis which gives them access to their earnings more quickly
• Legal protections against being overworked according to the FLSA guidelines

Why Should HR Care About Exempt and Non-exempt Employee Classifications?

Understanding the difference between exempt and non-exempt employees is critical for HR teams as they will have to be able to answer employee questions regarding the differences and what it means for the pay and benefits they are offered. 

HR teams are primarily in charge of ensuring the salaries are paid out on time and employees are fairly compensated according to their contracts, so there are no good excuses for being out of touch with these regulations. 

What are some clear reasons why HR should be able to answer “What is an exempt employee?”

• To ensure legal compliance with the FLSA and other state regulations on standard and overtime pay
• Keep the finances of the organization in order and ensure all money is paid out on time and correctly
• Solidifies employee trust in the knowledge and capabilities of the HR team
• Avoid having to pay additional fines as accurate classification helps control labor costs 
• Ensures employees are satisfied with timely payments that do not require corrections and follow-ups
• Maintain accurate and up-to-date records of the organization’s transactions in case it’s necessary for future reference or audits
• Helps to prepare early for upcoming government regulations and changes to the system

Now that we’ve gone over some of the differences between exempt and non-exempt and the employee classification rules that set them apart, you should be able to go into your next job with more confidence and surety that it’s what you want. There are benefits to both exempt and non-exempt roles, so think about it carefully and determine what is best for you.

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