What Is Exempt vs Non-Exempt Employee: Understanding the Rules
It’s payday, and your check is smaller than you anticipated after putting in all those hours of work. Is your boss shortchanging you, or is something else at play? One question you might need to ask is whether your pay is different because of how wage laws apply to exempt vs. non-exempt employees. And who is exempt? The answer depends on many job-specific factors.
These labels can be confusing. A salaried employee is not automatically exempt. A job title such as “manager” does not automatically make someone exempt, either. The law generally looks at how an employee is paid and what the employee actually does. Understanding the rules and how they apply to your case can help you recognize when you may be owed additional wages and can help employers avoid costly classification mistakes.
Not Sure If You’re Correctly Classified As Exempt Or Non-Exempt?
A salary or a manager title doesn’t automatically make you exempt, the law looks at your actual pay and your actual day-to-day duties. Getting this wrong can mean missing out on overtime at 1.5 times your regular rate. Our team can help you find out where you actually stand.
Knowing your rights and obligations under federal and state wage laws can help you protect your money and your hard work. And working with an experienced Phoenix employment attorney can help ensure you understand every relevant detail of those laws. At Shields Petitti & Zoldan, PLC, we have recovered tens of millions for our clients, and we are committed to helping the people of Arizona resolve their employment disputes.
Federal Minimum Wage and Overtime Laws
The federal minimum wage is currently $7.25 per hour. And if an employee works more than 40 hours in a workweek, the federal Fair Labor Standards Act (FLSA) generally requires them to receive at least one and one-half times their regular rate for hours worked over 40.
Arizona Minimum Wage and Overtime Laws
Arizona’s minimum wage is higher than the federal minimum wage. As of January 1, 2026, Arizona’s statewide minimum wage is $15.15 per hour. Arizona law provides for annual cost-of-living adjustments to its minimum wage. Under federal law, an employee who is subject to state and federal minimum wage is entitled to the higher minimum wage, so employees in Arizona should be receiving $15.15 per hour unless they are exempt.
In general, employees of the state or political subdivisions who work overtime are entitled to at least 1.5 times their pay rate or 1.5 hours of compensatory time off at the discretion of their governing body. Arizona does not, however, have a private-sector overtime statute equivalent to the FLSA’s overtime provisions. For most Arizona private-sector employees, the FLSA provides the primary overtime rules, and they must be paid at least 1.5 times their rate of pay for time worked over 40 hours in a workweek.
An Arizona employee may have rights under the state and federal systems at the same time. Arizona law may determine the higher applicable minimum wage, while federal law may establish the employee’s right to overtime. Arizona’s minimum wage law has separate exemptions, so an employee may be exempt from federal overtime while still being subject to Arizona’s minimum wage requirements.
What Is the Law for Exempt vs. Non-Exempt Employees?
An exempt employee is excluded from several state and federal wage requirements. If you hold a particular type of position and make a certain amount of money, you may not have a right to minimum wage or overtime. But an employer cannot make you exempt simply by giving you a specific title or paying you a salary. The details of your job must satisfy the requirements of the applicable exemption.
Which Employees Are Exempt Under Federal Law?
In general, FLSA wage laws do not apply to the following employees:
- Executives—whose primary duties include management, who have some kind of authority to hire and fire, and who make at least $684 per week;
- Administrators—whose primary duties include non-manual office work related to general business operations or management, who have discretion regarding certain matters, and who make at least $684 per week;
- Professionals—whose work requires artistic originality or advanced knowledge in science or learning, and who earn at least $684 per week;
- Computer employees—who work in analysis, programming, engineering, or a similarly skilled position, and who make at least $684 per week or $27.63 per hour;
- Outside salespeople—whose primary duties include making sales or obtaining contracts and who are regularly away from the employer’s workplace; and
- Highly compensated employees—who perform non-manual work and make at least $107,432 per year.
The FLSA’s white-collar exemptions generally do not apply to blue-collar workers or to police, firefighters, paramedics, EMTs, and similar first responders, regardless of their rank or pay.
How Are Arizona Minimum Wage Exemptions Different?
One potential source of confusion is that “exempt” can mean different things under different statutes. For exempt vs. non-exempt employees, Arizona’s minimum wage law has relatively few exclusions.
The state minimum wage requirements do not apply to employees who:
- Are employed by a parent or sibling;
- Perform casual babysitting services in an employer’s home;
- Work for the State of Arizona or the United States government; or
- Are employed by a small business with less than $500,000 in annual gross revenue when that business is also exempt from federal minimum wage provisions.
The small-business exception is narrow. The Industrial Commission of Arizona has cautioned that most Arizona small businesses will still be subject to Arizona’s minimum wage requirements because federal coverage can still apply.
What About Tipped Employees?
The requirements for tipped employees occupy a special middle ground when it comes to what the law is for exempt vs. non-exempt employees.
Employees who customarily receive tips are entitled to a very different minimum wage:
- Under federal law. An employee who regularly receives more than $30 in tips each month can be paid a minimum of $2.13 an hour if their tips bring their hourly wage up to at least $7.25 per hour.
- Under Arizona law. An employee who regularly receives tips can be paid a minimum of $12.15 per hour (or $3.00 less than the state’s hourly minimum wage) if their tips bring their hourly wage up to the minimum wage rate.
Determining the proper wage procedures that apply to you as a customarily tipped employee can be tricky business. Shields Petitti & Zoldan has decades of combined experience and knowledge to help ensure your employer is paying you according to the correct rules.
How Do You Know If Rules for Non-Exempt vs. Exempt Employees Apply?
When you want to know whether your paycheck is correct according to state or federal wage laws, consider:
- How you are paid,
- Your real day-to-day duties,
- Which exemptions your employer claims,
- Whether the required salary threshold applies to you and is satisfied, and
- Whether state and federal wage laws cover your employment relationship.
You should also consider speaking to a skilled attorney. Correctly distinguishing exempt vs. non-exempt employees can affect thousands of dollars in wages, and you want to make sure you get the distinction right.
Get Your Pay Right with Us
Shields Petitti & Zoldan is an award-winning and recognized employment law firm that advises employees and businesses in Arizona on employment law matters. We work diligently for the rights of those in the workforce, and we have recovered millions for our clients.
If you have questions about your wage rights or obligations, talk to us right away. You can call us or contact us online to schedule an appointment.
Legal References Used to Inform This Page
To ensure the accuracy and clarity of this page, we referenced official legal and other resources during the content development process:
- Federal minimum wage, 29 U.S.C. § 206 (a) (2026).
- Arizona minimum wage, A.R.S. § 23-363 (2025).
- State government worker overtime, Arizona Legislature, A.R.S. § 23-391 (2025).
- The Industrial Commission of Arizona, “The Fair Wages and Healthy Families Act.”
- The Industrial Commission of Arizona, “Frequently Asked Questions (FAQs) About Minimum Wage and Earned Paid Sick Time” pp. 8-9 (rev. Feb. 22, 2022).
- U.S. Department of Labor, “Overtime Pay.”
- U.S. Department of Labor, “Fact Sheet #17A: Exemption for Executive, Administrative, Professional, Computer & Outside Sales Employees Under the Fair Labor Standards Act (FLSA)” (rev. Sept. 2019).
- U.S. Department of Labor, Fact Sheet #15: Tipped Employees Under the Fair Labor Standards Act (FLSA).”
