Overtime-Exempt Salary Thresholds for 2027: Service Managers, Dispatchers, and Techs

Every growing trade shop eventually puts someone on salary: the first service manager, the dispatcher who runs the board, the office manager who does everything. “Salaried” and “exempt from overtime” aren’t the same thing, though, and the gap between them is one of the most common wage claims in the service industry. This guide covers the 2027 numbers and, more importantly, which roles at an HVAC, plumbing, electrical, or other trade company can actually be exempt.

The federal threshold: what happened

In 2024, the Department of Labor raised the salary minimum for the executive, administrative, and professional (“white collar”) exemptions, first to $844 a week and then to $1,128 a week starting January 1, 2025. A federal court in Texas vacated the rule nationwide in November 2024, before the second increase took effect. In May 2026, the DOL published a final rule removing the vacated text and restoring the 2019 regulations.

Sources: Proskauer’s Law and the Workplace blog on the DOL’s May 2026 rule; HR Calcs. The 10% bonus credit is from the 2019 regulations at 29 CFR 541.602.

The federal number is low. In most states, any reasonable manager salary clears it. The real question is the duties test, and in a handful of states, a much higher state threshold.

2027 state thresholds

When state and federal law both apply, the employee gets whichever is more protective. These states set their own salary minimums above the federal level:

Sources: Washington L&I; California DIR; New York Governor’s office 2027 minimum wage notice; HR Calcs and State Law Briefing for state compilations. New York’s thresholds apply to the executive and administrative exemptions; New York has no separate salary test for professionals. If New York’s proposed March 1, 2027 minimum wage increase passes, the downstate threshold would likely rise. At the current 75× ratio, $17.60 would mean about $1,320 a week.

California is stricter in more than salary. An exempt employee must be “primarily engaged” in exempt duties, which California measures as more than half of their working time. The federal test looks at the employee’s primary duty more holistically. California also doesn’t let bonuses count toward the salary minimum.

The three tests every exempt employee must pass

The executive exemption

Under 29 CFR 541.100, an exempt executive:

• Has management of the business or a recognized department as their primary duty;
• Customarily and regularly directs the work of at least two full-time employees or the equivalent; and
• Has authority to hire or fire, or their recommendations on hiring, firing, and promotion get particular weight.

The administrative exemption

Under 29 CFR 541.200, an exempt administrator’s primary duty is office or non-manual work directly related to management or general business operations, and includes the exercise of discretion and independent judgment with respect to matters of significance. Following a script, a price book, or a set of dispatch rules usually isn’t discretion and independent judgment.

The professional exemption

The learned professional exemption requires knowledge customarily acquired through a prolonged course of specialized intellectual instruction, like an engineering degree. Under 29 CFR 541.301, it doesn’t apply to occupations where most workers learn the skill through experience, apprenticeship, or training. A licensed master plumber isn’t a learned professional for FLSA purposes.

Why techs are never exempt

29 CFR 541.3(a) says the white-collar exemptions don’t apply to manual laborers or other blue-collar workers who perform work involving repetitive operations with their hands, physical skill, and energy. It specifically lists carpenters, electricians, mechanics, plumbers, iron workers, craftsmen, operating engineers, longshoremen, construction workers, and laborers, and says they’re entitled to overtime no matter how highly paid they are.

That includes the $140,000 HVAC tech, the lead installer, and the “field supervisor” who spends most of the day turning wrenches. The highly compensated employee exemption doesn’t save them either; it applies only to employees whose primary duty includes office or non-manual work.

The narrow exception: a working foreman whose primary duty is genuinely managing a crew, with the authority that goes with it, may qualify as an executive if they meet every part of the test. Most “lead techs” who manage one helper while doing the job themselves don’t.

Role by role: who can be exempt at a trade company

The dispatcher problem

Dispatchers are the most common misclassification in field service. The job feels important and stressful, and it is. But the administrative exemption requires discretion and independent judgment over matters of significance: things like setting policy, negotiating contracts, or committing the company in significant ways. Matching calls to techs by location, skill, and availability, following company rules, is usually treated as skilled routine work. A dispatcher who also hires and manages the CSR team and sets dispatch policy may be different. Most aren’t.

The service manager test

A service manager is a strong executive candidate if they:

• Run the service department as their main job, not as a side duty while running calls;
• Direct at least two full-time techs or the equivalent;
• Interview, hire, discipline, or fire, or make recommendations that the owner actually follows.

If your service manager spends four days a week in a truck and one day doing schedules, they’re a tech with a title. Pay overtime.

Outside sales and commission exemptions

Outside sales

The outside sales exemption has no salary requirement. It applies to an employee whose primary duty is making sales or obtaining orders, and who is customarily and regularly engaged away from the employer’s place of business. An HVAC comfort advisor who runs in-home sales appointments all day fits the pattern. A rep who sells mostly by phone from the office doesn’t. A tech who sells while servicing equipment doesn’t, because their primary duty is the service work.

The retail and service commission exemption, Section 7(i)

Some service companies use FLSA Section 7(i) for commissioned techs. It exempts an employee of a retail or service establishment from overtime in a week if their regular rate is more than 1.5 times the federal minimum wage (more than $10.875 an hour) and more than half their pay over a representative period of at least one month comes from commissions. Whether a particular trade business qualifies as a “retail or service establishment” is fact-specific, records must prove both conditions every week, and states like California have their own, stricter commission rules. Don’t try this without an attorney.

Salary basis traps

• Docking for partial days. Deducting a few hours because a salaried manager left early generally breaks the salary basis. Full-day absences for personal reasons can be deducted.
• “Salary plus overtime” is fine, but “salary minus slow weeks” isn’t.
• Disciplinary suspensions can only be deducted in full-day increments, under a written policy, for workplace conduct violations.
• Bonuses toward the threshold: federally, up to 10% of the $684 can come from nondiscretionary bonuses paid at least annually, with a catch-up payment allowed. California doesn’t allow this.
• Part-time salaried managers still need the full weekly threshold under federal rules.

What misclassification costs

A dispatcher paid $50,000 a year on salary, treated as exempt, regularly works 50 hours a week. How courts calculate the back pay depends on whether the salary was meant to cover all hours or just 40:

Then multiply. The FLSA allows recovery for two years, or three if the violation is willful, plus an equal amount in liquidated damages, plus the employee’s attorney’s fees. Three years at the time-and-a-half method, doubled, is $112,500 before fees, for one dispatcher. State law can add more; California adds waiting-time and wage statement penalties and has a four-year lookback under its unfair competition law.

How to fix it

Option 1: raise the salary

Only works if the duties already qualify. A real service manager at $68,000 in California needs a raise to $72,384 by January 1, 2027.

Option 2: reclassify as non-exempt, without cutting take-home

Work backward from what they earn now. A $50,000 dispatcher who works 50 hours a week (40 straight-time hours plus 10 overtime hours at 1.5×) is equivalent to 55 hours of pay:

$961.54 ÷ 55 = $17.48 an hour. At $17.48 with 10 hours of overtime, weekly pay stays at $961.54.

That keeps cost flat if hours stay the same, and gives you a reason to manage hours down. Check that the rate is above your state and local minimum wage, and explain the change to the employee as a pay-practice update, not a pay cut.

Option 3: fix the past

If someone has been misclassified for years, talk to an employment attorney before you reclassify. Changing their status is the right move, but how you handle back pay matters.

December checklist

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