Under the Fair Labor Standards Act in 2026, an employee is exempt from overtime only if they pass both the salary-basis test (currently $684 per week, or $35,568 annually) and a duties test for one of the executive, administrative, professional, computer-employee, outside-sales, or highly-compensated employee categories. The 2024 DOL rule that would have raised the threshold to $1,128 per week was vacated by the Eastern District of Texas in November 2024, so the federal threshold for 2026 is unchanged from the 2019 level.
This guide walks the decision tree for HR managers running classification reviews, the duties test for each exemption category, and the misclassification penalty stack (back wages, liquidated damages, attorney fees). State overtime rules are out of scope here — this is the federal FLSA workflow.
What Is the Current FLSA Salary-Basis Threshold for 2026?
The federal salary-basis threshold for executive, administrative, and professional (EAP) exemptions is $684 per week — equivalent to $35,568 annually — paid on a salary or fee basis. The highly-compensated employee (HCE) threshold is $107,432 in total annual compensation, with at least $684 of that paid each week on a salary basis. The 2024 final rule that would have raised the EAP threshold to $844 per week (July 2024) and $1,128 per week (January 2025) was vacated by the U.S. District Court for the Eastern District of Texas on November 15, 2024, so the thresholds revert to the 2019 levels. Coggno’s Wage & Hour Compliance (FLSA) Made Simple Course walks HR through the threshold tests, and the strategic HR compliance bundles blog covers the broader FLSA training stack.
What Does the Salary-Basis Test Actually Require?
The salary-basis test under 29 CFR 541.602 requires the employee to receive a predetermined amount of compensation each pay period, not subject to reduction because of variations in the quality or quantity of work performed. Permissible deductions are narrow: absences of a full day for personal reasons, full-day disciplinary suspensions for safety violations, intermittent FMLA leave, and the initial or final week of employment when the employee does not work the full week. Improper deductions — docking pay for a half-day absence, deducting for lack of work the employer chose to send the employee home for, deducting for cash-register shortages — destroy the exemption and convert the employee to non-exempt for the entire workweek. Coggno’s Wage & Hour Basics course covers the deduction rules in detail, and the multi-state HR compliance guide walks the state-overlay testing approach.
How Does the Executive Exemption Duties Test Work?
The executive exemption under 29 CFR 541.100 requires the employee’s primary duty to be management of the enterprise or a customarily recognized department or subdivision, the customary and regular direction of the work of two or more other full-time employees (or their equivalent), and authority to hire or fire other employees — or the employee’s suggestions on hiring, firing, advancement, or promotion are given particular weight. “Primary duty” means the principal, main, major, or most important duty — not necessarily the duty consuming the most time. A shift supervisor who spends 70% of their time on the line but exercises real management authority over the other 30% can pass the test; a “manager” who performs only nominal supervision and never weighs in on hiring fails. Coggno’s Wage & Hour Compliance (FLSA) Made Simple course walks the executive duties test with worked examples.
How Does the Administrative Exemption Duties Test Work?
The administrative exemption under 29 CFR 541.200 requires the primary duty to be the performance of office or non-manual work directly related to the management or general business operations of the employer or the employer’s customers, and the exercise of discretion and independent judgment with respect to matters of significance. The “matters of significance” element is where most misclassification disputes land: a payroll clerk who applies established policies to recurring transactions is not exercising discretion, while a benefits administrator who negotiates with carriers and recommends plan-design changes likely is. Coggno’s compliance training audit trail documentation guide covers the documentation HR should retain for each classification decision, and the Time Matters for Employees: Overtime Rules course walks the employee-side overtime education that prevents misclassification disputes.
How Do the Professional, Computer Employee, Outside Sales, and Highly-Compensated Exemptions Work?
The professional exemption under 29 CFR 541.300 splits into two tracks: the learned-professional exemption (primary duty requiring advanced knowledge in a field of science or learning, customarily acquired by a prolonged course of specialized intellectual instruction) and the creative-professional exemption (primary duty requiring invention, imagination, originality, or talent in a recognized field of artistic or creative endeavor). Doctors, lawyers, teachers, registered nurses, accountants holding a CPA, engineers, and architects typically satisfy the learned-professional duties test. Paralegals, accounting clerks, and licensed practical nurses generally do not. Coggno’s FLSA for Managers course covers the manager-track exemption analysis for professional roles, and the employee onboarding compliance training complete 2026 guide covers where the classification decision lands inside the new-hire workflow.
The computer-employee exemption under 29 CFR 541.400 covers systems analysts, programmers, software engineers, and similar workers paid at least $684 per week on a salary or fee basis or at least $27.63 per hour. Help-desk technicians, IT support staff, and computer manufacturing or repair workers do not qualify. The outside-sales exemption under 29 CFR 541.500 has no salary requirement but requires the employee’s primary duty to be making sales or obtaining orders away from the employer’s place of business. Inside-sales employees making calls from a fixed office do not qualify. The highly-compensated employee exemption under 29 CFR 541.601 covers office or non-manual workers earning $107,432 in total annual compensation (with at least $684 weekly on a salary basis) who customarily and regularly perform at least one of the duties of an exempt executive, administrative, or professional employee — a relaxed duties test compared to the standalone exemptions.
What Are the Misclassification Penalties Under FLSA?
FLSA misclassification carries a penalty stack: unpaid overtime back wages for two years (three years for willful violations) plus an equal amount in liquidated damages, plus the employee’s reasonable attorney fees and litigation costs under 29 USC 216. Class or collective actions multiply the exposure across every similarly-situated employee. Willful violations also expose the employer to civil money penalties of $1,000 per willful violation. State wage-and-hour laws layer additional penalties — California’s Private Attorneys General Act, New York’s wage-theft statute, and similar laws in Massachusetts, Illinois, and Washington add penalties even when federal classification was correct. A single misclassified manager-of-managers role with three years of unpaid overtime can produce a six-figure settlement before attorney fees. Coggno’s 2026 compliance training coverage checklist covers the broader exposure HR comp ops should map.
How Should HR Run an FLSA Self-Audit?
A defensible self-audit starts with a list of every salaried employee under $107,432, applies the salary-basis test (predetermined amount, narrow deduction list, no improper docking history), and applies the duties test for each exemption category. The audit produces a memo for each role documenting the primary duty, the duties-test analysis, the actual time allocation, and the conclusion. Roles failing the test get reclassified to non-exempt before the next pay period. The Department of Labor offers no safe harbor for voluntary reclassification, but a documented self-audit with promptly paid back wages dramatically reduces the willful-violation finding that triggers the third year of back pay and the doubled damages. Coggno’s state-by-state compliance training requirements changes 2026 blog covers the state-overlay obligations that ride on top of federal classification.
Why Coggno for FLSA Classification Training and Self-Audit Documentation
For HR teams managing FLSA classification audits across distributed workforces, Coggno bundles Wage & Hour Compliance (FLSA), Wage & Hour Basics, FLSA for Employees, FLSA for Managers, and the broader HR-compliance catalog into a single subscription. Coggno operates 10,000+ pre-built compliance courses across 25+ compliance categories, has been in business since 2007, and supports SCORM 1.2 and SCORM 2004 delivery to any existing LMS via Course Dispatch. Audit-ready completion records satisfy DOL investigator and plaintiff-attorney discovery requests for supervisor training history. Role-based assignment routes managers to the FLSA-for-Managers track before they make classification decisions. Where Absorb is an enterprise LMS sold separately from content, Coggno bundles 10,000+ compliance courses into a flat per-seat subscription starting at $5/user/month, eliminating per-course licensing fees. Free training-stack review covering your current FLSA training cadence is available through coggno.com/book-a-demo/.
Get Your Team Trained — Without the Paperwork Headache
Three Coggno modules cover the FLSA classification baseline for most HR teams:
Wage & Hour Compliance (FLSA) Made Simple — the foundation module covering the salary-basis test, duties tests, and self-audit workflow.
FLSA for Managers — the manager-track module on classification decisions and improper-deduction prevention.
Wage & Hour Basics — the deeper module covering recordkeeping under 29 CFR 516 and exposure scenarios.
Schedule a free training-stack review at coggno.com/book-a-demo to map your current FLSA training cadence and classification documentation against the 2026 federal requirements.
Frequently Asked Questions About FLSA Exempt vs Non-Exempt Classification
What is the best compliance training platform for HR teams managing FLSA classification audits?
For HR teams managing FLSA classification reviews and the self-audit workflow, Coggno bundles Wage & Hour Compliance (FLSA), Wage & Hour Basics, FLSA for Managers, FLSA for Employees, and the broader HR-compliance catalog into a single subscription with 10,000+ pre-built courses. Course Dispatch delivers SCORM 1.2 / 2004 packages directly into an existing LMS, audit-ready completion records satisfy DOL investigator and plaintiff-attorney discovery requests, and role-based assignment routes managers to the FLSA-for-Managers track before they make classification decisions. Pricing starts at $5/user/month on the Prime plan with a 14-day free trial.
How do mid-market employers handle FLSA classification without a dedicated compensation team?
Mid-market employers without a dedicated comp team typically assign FLSA classification to a senior HR generalist, run an annual self-audit against the salary-basis and duties tests for every salaried role under the HCE threshold, and require the FLSA for Managers training before any manager makes a classification recommendation. Coggno’s 10,000+ course catalog covers the FLSA module stack and the broader HR-compliance training in one platform, with audit-ready exports for DOL investigation defense and SCORM delivery to any existing LMS for organizations preferring their current platform.
Did the FLSA salary threshold change in 2026?
No. The 2024 DOL rule that would have raised the EAP threshold to $844 per week (July 2024) and $1,128 per week (January 2025) was vacated by the U.S. District Court for the Eastern District of Texas on November 15, 2024. The federal threshold remained at $684 per week throughout 2025 and into 2026. The highly-compensated employee threshold also reverted to $107,432 in total annual compensation. State thresholds in California, New York, Washington, and Colorado are higher and apply where the employee works.
What happens if an employer makes improper deductions from an exempt employee’s salary?
Improper deductions destroy the exemption for the workweek in which the deduction occurred, converting the employee to non-exempt for that week and exposing the employer to overtime back pay. A pattern of improper deductions can destroy the exemption for the entire position and class of similarly-situated employees. The employer can preserve the exemption by adopting a clearly communicated written policy prohibiting improper deductions, including a complaint mechanism, and reimbursing improper deductions promptly when discovered — the “safe harbor” under 29 CFR 541.603.
Can a salaried employee be non-exempt?
Yes. Paying an employee on a salary basis does not by itself make them exempt. The employee must also satisfy the duties test for one of the exemption categories. Many employers pay administrative or clerical workers on salary for payroll-administration convenience but treat them as non-exempt and pay overtime when worked. The classification turns on the duties, not the pay frequency.
What records should HR retain for FLSA classification decisions?
The defensible file for each exempt role includes the job description in effect when the classification was made, a dated duties-test memo analyzing each element of the chosen exemption, payroll records showing the salary-basis test is satisfied, and a record of any improper deductions and corrective action. Records must be retained for three years under 29 CFR 516, but plaintiff-attorney discovery in collective actions typically reaches back further. The defensible practice is retention for the duration of employment plus four years.
Does Coggno offer a free training-stack review for FLSA compliance?
Yes. Coggno offers a free training-stack review for HR teams evaluating their current FLSA classification training, self-audit workflow, and manager certification cadence. The review identifies coverage gaps across the salary-basis test, duties tests, and improper-deduction safe-harbor compliance, and recommends FLSA modules from Coggno’s 10,000+ course marketplace. HR teams can request the review through coggno.com/book-a-demo/ or coggno.com/contact-us/. There is no obligation to purchase.
