Overtime Exemption Salary Requirements in Arizona: What Employers Need to Know in 2026

What Does “Overtime Exemption” Actually Mean Under Federal Law?

When employees work more than 40 hours a week, they often expect to get overtime pay. This type of pay was established by the Fair Labor Standards Act and it requires employers to pay their non-exempt employees time-and-a-half for any overtime hours. There are some exemptions to this rule, however, but only if specific qualifications are met. 

Exempt vs. Non-Exempt Employees Explained

There are specific overtime exemption salary requirements in Arizona and an employee must meet all three tests in order to be exempt:

• They are paid a salary
• They meet a certain salary threshold
• They are performing specific job duties.

Anyone who does not meet all three of these tests is non-exempt and qualifies for overtime pay. 

Why a Job Title or a Salary Alone Doesn’t Create an Exemption

Some employers misunderstand the exemptions and assign a salaried employee a specific job title in order to avoid overtime pay. Let’s say this person mainly answers phones and does the scheduling, but their title is manager. They will still be a non-exempt employee regardless of their title, and weekly salary wages. And this is very important to remember.

The law will look at what the employee actually does in a day, not the title they are given. The same rule applies to salary amounts. An employee will not become exempt simply because they are above the salary threshold. They must meet all three overtime exemption duties tests in order to become exempt from overtime pay requirements. When they don’t meet one or more of the qualifications, their extra work is salaried employee overtime in Arizona. 

The Current Federal Overtime Salary Threshold in 2026

There has been some back-and-forth as to the salary threshold. In general there has been very little change to the amounts over the years, especially in relation to how wages and inflation has grown. This has caused a lot of disagreements between lawmakers who believe it should be higher while others want it to remain stable. The most recent disagreement occurred in 2024 bringing some confusion as to what the threshold is in 2026. 

The 2024 Rule, the Court Challenge, and What Changed

In 2016, there was an attempt to raise the threshold to $913 per week, but it was blocked by federal court. In 2019, the amount was raised to $684 per week, effective January 1, 2020. Then in 2024, there was a brief time when the threshold was raised to $844 per week with a plan of raising it to $1,128 by January 2025. 

Several business groups, employers, and state governments fought against this increase through lawsuits. In November of 2024, lawmakers argued that the Department of Labor put too much emphasis on the significant salary increase instead of the actual job duties of the employee and the updates never took effect.

This has led to some confusion as to what the actual FLSA salary threshold is in 2026. In May 2026, the Department of Labor brought back the pre-2024 threshold, setting it back to what it was in 2019: $684 per week or $35,568 per year for executive, administrative, and professional exemptions.

Highly Compensated Employees: The Separate Threshold

When it comes to highly compensated employees, there is a separate threshold to be aware of. As of 2026, highly compensated employees must meet the following tests:

• Earn at least $107,432 annually in compensation
• Receive at least $684 per week on salary or fee basis
• Regularly perform at least one of the exempt duties of an executive, administrative, or professional employee.

There is not as much weight put on the duties test as it is assumed that if someone is a highly compensated individual, they are most certainly performing exempt work.

The Three Tests Every Exempt Employee Must Pass

So what exactly are the three tests that must be passed in order to make an employee exempt from overtime pay? It’s important to have an understanding of these three tests to avoid employee misclassification penalties. It’s also important to understand that passing one of these tests alone does not make an employee exempt.

The Salary-Basis Test

The salary-basis test is the first step in determining if an employee is exempt. They must be paid a predetermined and fixed salary that does not change based on hours or quantity of work. For example, an employee is not exempt if their salary changes based on whether they work 40 or 50 hours of work in a week or whether work was slow and they left early. It must always be the same.

The Salary-Level Test

The second test that helps determine whether an individual is an exempt vs non-exempt employee in Arizona is the salary-level test. The employer must be compensating them at least $684 per week or $35,568 per year. To be exempt from overtime, they must meet or exceed this salary level.

The Duties Test (Where Most Employers Slip Up)

Finally, the duties test must be met. This is the test employers often miss. The primary duties of the employee must fit within the following categories and they must perform the actual job duties of the category. Not only hold the title.

• Executive employees
• Administrative employees
• Learned professionals
• Creative professionals
• Computer employees
• Outside sales employees

How Arizona Law Interacts with Federal Overtime Rules

The overtime rules and tests can vary from state to state. The $684 per week threshold is currently the federal standard. Each state can enforce different rules and where they differ with the federal rules and are more protective of the employee, state law should be followed. As of 2026, Arizona does not have any specific overtime rules and so federal law should be followed for salaried employee overtime in Arizona.

What Multi-State Arizona Employers Should Watch

While Arizona does not have its own specific overtime rules, there are other states that are taking steps to be more protective of the employee. Thresholds in several states including California and Colorado are rising in 2026. For companies that have employees that live in these states, they must meet the more protective level of that state.

The Real Cost of Getting Overtime Exemption Wrong in Arizona

Employee misclassification penalties can be significant. In some cases, the consequences can be more costly than just paying the overtime that is owed. The penalties can include:

• Required back pay for unpaid overtime
• Liquidated damages equal to the amount of unpaid wages under the FLSA
• Civil penalties in certain situations
• The employee’s attorneys’ fees and court costs if the employer is found liable
• Government investigations by the US Department of Labor
• Costly wage-and-hour lawsuits, including class or collective actions involving multiple employees.

Common Misclassification Mistakes Arizona Businesses Make

In many cases, employers are not intentionally misclassifying their employees. Mistakes can be made and some are more common than others. A few of the biggest mistakes employers make in misclassification is assuming all salaried staff are exempt from overtime pay. Some employers mislabel assistant managers as well, not giving them the necessary duties to qualify them as exempt. 

In other cases, employers may not pay close enough attention to the duties of an employee as their roles evolve. They may assume the employee is exempt based on their salary amounts and title, but their actual performed duties do not match exempt status. As stated before, all three tests must be met in order to meet the overtime exemption salary requirements in Arizona. 

Why Overtime Rules Remain a Moving Target

Overtime pay has been governed by the Fair Labor Standards Act since 1938, but the regulations within do not remain the same. Just recently, there have been several attempts at raising the federal salary threshold. These changes can happen because of changing federal administrations that have different priorities, court challenges, or state law developments.

While the 2026 salary threshold has been established, the Department of Labor continues to review it for possible changes. If you are an employer, keep your eye on these rules and don’t fall into the trap of setting the threshold at the current federal level and forgetting.

Get Your Overtime Exemptions Right- Talk to an Arizona Employment Lawyer

One of the best ways you can ensure your business runs smoothly and you do not face expensive misclassification penalties is to hire a skilled employment lawyer. In most situations, it is cheaper to be proactive and ensure the ever-changing rules are being followed than to face the consequences down the road. 

At Denton Peterson Dunn, our lawyers have years of experience handling some of the most complex employment cases in the Mesa, Scottsdale, and Phoenix areas. Hire our team to take an in-depth look at your business practices and exempt classifications to ensure the best path to success for your company! 

Contact us today by phone at 480-325-9900 to get started or through our Mesa Employment Lawyers practice page!