What does exempt vs. non-exempt actually mean?

The terms come from the Fair Labor Standards Act, and they answer one question: does federal overtime law cover you? Non-exempt employees must receive time-and-a-half for hours past 40 in a week. Exempt employees are exempt from that protection, meaning hour 60 pays the same as hour 40.

Exempt status legally requires passing multiple tests: payment on a salary basis, above a Labor Department threshold that has been revised and litigated in recent years, and, the part employers fudge, actual executive, administrative, or professional duties. A salary alone does not make you exempt, and neither does a manager title stapled onto non-managerial work. Misclassification is one of the most common wage violations in the country.

If your duties are routine and closely supervised but your paycheck says exempt, that is worth a conversation with your state labor department, which can recover back overtime. Several states, notably California, add protections beyond the federal floor.