diff --git a/apps/web/src/canvas/node-helpers.ts b/apps/web/src/canvas/node-helpers.ts
index 202b3c60..90a6518d 100644
--- a/apps/web/src/canvas/node-helpers.ts
+++ b/apps/web/src/canvas/node-helpers.ts
@@ -1,2 +1,2 @@
 // Re-export from @zseven-w/pen-core — the canonical source
-export { isBadgeOverlayNode } from '@zseven-w/pen-core';
+export { isOverlayNode } from '@zseven-w/pen-core';
diff --git a/apps/web/src/services/ai/design-canvas-ops.ts b/apps/web/src/services/ai/design-canvas-ops.ts
index 79185b44..95b30dfb 100644
--- a/apps/web/src/services/ai/design-canvas-ops.ts
+++ b/apps/web/src/services/ai/design-canvas-ops.ts
@@ -50,7 +50,7 @@ import {
   sanitizeLayoutChildPositions,
   sanitizeScreenFrameBounds,
   hasActiveLayout,
-  isBadgeOverlayNode,
+  isOverlayNode,
 } from './design-node-sanitization';
 
 // ---------------------------------------------------------------------------
@@ -224,7 +224,7 @@ export function insertStreamingNode(node: PenNode, parentId: string | null): voi
 
   const parentNode = resolvedParent ? getNodeById(resolvedParent) : null;
 
-  if (parentNode && hasActiveLayout(parentNode) && !isBadgeOverlayNode(node)) {
+  if (parentNode && hasActiveLayout(parentNode) && !isOverlayNode(node)) {
     if ('x' in node) delete (node as { x?: number }).x;
     if ('y' in node) delete (node as { y?: number }).y;
     // Text defaults inside layout frames:
@@ -362,7 +362,7 @@ export function insertStreamingNode(node: PenNode, parentId: string | null): voi
 
     // Badge/overlay nodes prepend (index 0) so they render on top (earlier = higher z-order).
     // All other nodes append to preserve auto-layout generation order.
-    addNode(insertParent, node, isBadgeOverlayNode(node) ? 0 : Infinity);
+    addNode(insertParent, node, isOverlayNode(node) ? 0 : Infinity);
 
     // When a frame is inserted into a horizontal layout, equalize sibling card widths
     // to prevent overflow when multiple cards are placed in the same row.
diff --git a/apps/web/src/services/ai/design-node-sanitization.ts b/apps/web/src/services/ai/design-node-sanitization.ts
index a540bed1..996f98bd 100644
--- a/apps/web/src/services/ai/design-node-sanitization.ts
+++ b/apps/web/src/services/ai/design-node-sanitization.ts
@@ -1,7 +1,7 @@
 import type { PenNode } from '@/types/pen';
 import { clamp } from './generation-utils';
-export { isBadgeOverlayNode } from '@/canvas/node-helpers';
-import { isBadgeOverlayNode } from '@/canvas/node-helpers';
+export { isOverlayNode } from '@/canvas/node-helpers';
+import { isOverlayNode } from '@/canvas/node-helpers';
 export { deepCloneNode } from '@/stores/document-tree-utils';
 
 // ---------------------------------------------------------------------------
@@ -59,11 +59,11 @@ export function hasActiveLayout(node: PenNode): boolean {
   return node.layout === 'vertical' || node.layout === 'horizontal';
 }
 
-// isBadgeOverlayNode moved to @/canvas/node-helpers — re-exported above
+// isOverlayNode moved to @/canvas/node-helpers — re-exported above
 
 export function sanitizeLayoutChildPositions(node: PenNode, parentHasLayout: boolean): void {
-  // Badge/overlay nodes retain their x/y for absolute positioning
-  if (parentHasLayout && !isBadgeOverlayNode(node)) {
+  // Overlay nodes (role: 'overlay') retain their x/y for absolute positioning
+  if (parentHasLayout && !isOverlayNode(node)) {
     if ('x' in node) delete (node as { x?: number }).x;
     if ('y' in node) delete (node as { y?: number }).y;
   }
diff --git a/packages/pen-ai-skills/skills/knowledge/role-definitions.md b/packages/pen-ai-skills/skills/knowledge/role-definitions.md
index 4a1c06d4..b4583dd7 100644
--- a/packages/pen-ai-skills/skills/knowledge/role-definitions.md
+++ b/packages/pen-ai-skills/skills/knowledge/role-definitions.md
@@ -77,6 +77,10 @@ Media roles:
 - avatar: width/height=48, cornerRadius=24, clipContent=true (size adapts to explicit width)
 - icon: width=24, height=24
 
+Layout-escape roles:
+
+- overlay: the ONLY way to place a child at absolute x/y inside a parent that uses `layout: vertical|horizontal`. Use for notification dots on an icon, corner ribbons on a card, floating status indicators. The child keeps its explicit `x`/`y` while siblings flow normally. Do NOT use `role: 'overlay'` for inline components — `badge`, `pill`, `tag` are inline (they flow in layout like any other child, NOT floating). Do NOT use `role: 'overlay'` as a substitute for `layout: 'none'` on the parent.
+
 Typography roles:
 
 - heading: lineHeight=1.2 (CJK: 1.35), letterSpacing=-0.5 (CJK: 0). In vertical layout: textGrowth=fixed-width, width=fill_container
diff --git a/packages/pen-core/CLAUDE.md b/packages/pen-core/CLAUDE.md
index faa1f632..35efbbaf 100644
--- a/packages/pen-core/CLAUDE.md
+++ b/packages/pen-core/CLAUDE.md
@@ -11,7 +11,7 @@ Pure document tree operations, layout engine, variables, normalization, boolean
 - `src/arc-path.ts` — `buildEllipseArcPath`, `isArcEllipse`: SVG arc path generation for partial ellipses
 - `src/path-anchors.ts` — `anchorsToPathData`, `pathDataToAnchors`, `getPathBoundsFromAnchors`, `inferPathAnchorPointType`
 - `src/font-utils.ts` — `cssFontFamily`: CSS font-family string builder
-- `src/node-helpers.ts` — `isBadgeOverlayNode`, `sanitizeName` (PascalCase conversion)
+- `src/node-helpers.ts` — `isOverlayNode` (detects `role: 'overlay'`), `sanitizeName` (PascalCase conversion)
 - `src/design-md-parser.ts` — `parseDesignMd`, `generateDesignMd`, `designMdColorsToVariables`, `extractDesignMdFromDocument`
 - `src/constants.ts` — Canvas rendering constants (zoom limits, colors, snap thresholds, pen tool sizes, guide styling)
 - `src/id.ts` — `generateId` (nanoid wrapper)
diff --git a/packages/pen-core/src/__tests__/node-helpers.test.ts b/packages/pen-core/src/__tests__/node-helpers.test.ts
index 6954ac4f..f0af73bf 100644
--- a/packages/pen-core/src/__tests__/node-helpers.test.ts
+++ b/packages/pen-core/src/__tests__/node-helpers.test.ts
@@ -1,30 +1,40 @@
 import { describe, it, expect } from 'vitest';
 import type { PenNode } from '@zseven-w/pen-types';
-import { isBadgeOverlayNode } from '../node-helpers';
+import { isOverlayNode } from '../node-helpers';
 
-describe('isBadgeOverlayNode', () => {
-  it('returns true for badge role', () => {
+describe('isOverlayNode', () => {
+  it('returns true for overlay role', () => {
+    const node: PenNode = { id: '1', type: 'rectangle', role: 'overlay' };
+    expect(isOverlayNode(node)).toBe(true);
+  });
+
+  it('returns false for badge role (inline component, not overlay)', () => {
     const node: PenNode = { id: '1', type: 'rectangle', role: 'badge' };
-    expect(isBadgeOverlayNode(node)).toBe(true);
+    expect(isOverlayNode(node)).toBe(false);
   });
 
-  it('returns true for pill role', () => {
+  it('returns false for pill role (inline component, not overlay)', () => {
     const node: PenNode = { id: '1', type: 'rectangle', role: 'pill' };
-    expect(isBadgeOverlayNode(node)).toBe(true);
+    expect(isOverlayNode(node)).toBe(false);
   });
 
-  it('returns true for name containing "badge"', () => {
+  it('returns false for tag role (inline component, not overlay)', () => {
+    const node: PenNode = { id: '1', type: 'rectangle', role: 'tag' };
+    expect(isOverlayNode(node)).toBe(false);
+  });
+
+  it('returns false for name containing "badge" without explicit role', () => {
     const node: PenNode = { id: '1', type: 'rectangle', name: 'Notification Badge' };
-    expect(isBadgeOverlayNode(node)).toBe(true);
+    expect(isOverlayNode(node)).toBe(false);
   });
 
-  it('returns true for name containing "overlay"', () => {
+  it('returns false for name containing "overlay" without explicit role', () => {
     const node: PenNode = { id: '1', type: 'rectangle', name: 'Image Overlay' };
-    expect(isBadgeOverlayNode(node)).toBe(true);
+    expect(isOverlayNode(node)).toBe(false);
   });
 
   it('returns false for regular nodes', () => {
     const node: PenNode = { id: '1', type: 'rectangle', name: 'Button' };
-    expect(isBadgeOverlayNode(node)).toBe(false);
+    expect(isOverlayNode(node)).toBe(false);
   });
 });
diff --git a/packages/pen-core/src/__tests__/normalize-tree-layout.test.ts b/packages/pen-core/src/__tests__/normalize-tree-layout.test.ts
index 4630e623..2ef07875 100644
--- a/packages/pen-core/src/__tests__/normalize-tree-layout.test.ts
+++ b/packages/pen-core/src/__tests__/normalize-tree-layout.test.ts
@@ -126,11 +126,11 @@ describe('normalizeTreeLayout', () => {
     expect('y' in kids[1]).toBe(false);
   });
 
-  it('keeps x and y on badge overlay children', () => {
-    const badge: PenNode = {
-      id: 'badge1',
+  it('keeps x and y on overlay children', () => {
+    const overlay: PenNode = {
+      id: 'overlay1',
       type: 'rectangle',
-      role: 'badge',
+      role: 'overlay',
       width: 8,
       height: 8,
       x: 40,
@@ -138,7 +138,7 @@ describe('normalizeTreeLayout', () => {
     } as PenNode;
     const node = frame({
       layout: 'horizontal',
-      children: [rect('a', { x: 5, y: 5 }), badge],
+      children: [rect('a', { x: 5, y: 5 }), overlay],
     });
     normalizeTreeLayout(node);
     const kids = (node as PenNode & { children: PenNode[] }).children;
@@ -178,25 +178,25 @@ describe('normalizeTreeLayout', () => {
   });
 
   it('overlay-only children do not block the vertical fallback', () => {
-    // A container whose only positioned children are overlays (badges) is
-    // still considered "model forgot layout" — the overlays retain their
+    // A container whose only positioned children are overlays is still
+    // considered "model forgot layout" — the overlays retain their
     // coordinates while the base frame gets a vertical layout for the rest.
-    const badge: PenNode = {
-      id: 'badge1',
+    const overlay: PenNode = {
+      id: 'overlay1',
       type: 'rectangle',
-      role: 'badge',
+      role: 'overlay',
       width: 8,
       height: 8,
       x: 40,
       y: 0,
     } as PenNode;
     const node = frame({
-      children: [rect('a'), rect('b'), badge],
+      children: [rect('a'), rect('b'), overlay],
     });
     normalizeTreeLayout(node);
     expect((node as PenNode & { layout?: string }).layout).toBe('vertical');
     const kids = (node as PenNode & { children: PenNode[] }).children;
-    // badge still carries its absolute coordinates
+    // overlay still carries its absolute coordinates
     expect(kids[2].x).toBe(40);
     expect(kids[2].y).toBe(0);
   });
diff --git a/packages/pen-core/src/index.ts b/packages/pen-core/src/index.ts
index a6d51ba6..70bd9383 100644
--- a/packages/pen-core/src/index.ts
+++ b/packages/pen-core/src/index.ts
@@ -143,7 +143,7 @@ export { type BooleanOpType, canBooleanOp, executeBooleanOp } from './boolean-op
 export { cssFontFamily } from './font-utils.js';
 
 // Node helpers
-export { isBadgeOverlayNode, sanitizeName } from './node-helpers.js';
+export { isOverlayNode, sanitizeName } from './node-helpers.js';
 
 // Design-MD parser
 export {
diff --git a/packages/pen-core/src/layout/engine.ts b/packages/pen-core/src/layout/engine.ts
index c8871443..d18e7a4c 100644
--- a/packages/pen-core/src/layout/engine.ts
+++ b/packages/pen-core/src/layout/engine.ts
@@ -1,6 +1,6 @@
 import type { PenNode, ContainerProps, SizingBehavior, Padding } from '@zseven-w/pen-types';
 export type { Padding } from '@zseven-w/pen-types';
-import { isBadgeOverlayNode } from '../node-helpers.js';
+import { isOverlayNode } from '../node-helpers.js';
 import {
   parseSizing,
   estimateTextWidth,
@@ -119,7 +119,7 @@ export function inferLayout(node: PenNode): 'horizontal' | undefined {
 export function fitContentWidth(node: PenNode, parentAvail?: number): number {
   if (!('children' in node) || !node.children?.length) return 0;
   const visibleChildren = node.children.filter(
-    (child) => isNodeVisible(child) && !isBadgeOverlayNode(child),
+    (child) => isNodeVisible(child) && !isOverlayNode(child),
   );
   if (visibleChildren.length === 0) return 0;
   const c = node as PenNode & ContainerProps;
@@ -147,7 +147,7 @@ export function fitContentWidth(node: PenNode, parentAvail?: number): number {
 export function fitContentHeight(node: PenNode, parentAvailW?: number): number {
   if (!('children' in node) || !node.children?.length) return 0;
   const visibleChildren = node.children.filter(
-    (child) => isNodeVisible(child) && !isBadgeOverlayNode(child),
+    (child) => isNodeVisible(child) && !isOverlayNode(child),
   );
   if (visibleChildren.length === 0) return 0;
   const c = node as PenNode & ContainerProps;
@@ -254,8 +254,8 @@ export function computeLayoutPositions(parent: PenNode, children: PenNode[]): Pe
   const layout = c.layout || inferLayout(parent);
   if (!layout || layout === 'none') return visibleChildren;
 
-  const badgeNodes = visibleChildren.filter(isBadgeOverlayNode);
-  const layoutChildren = visibleChildren.filter((ch) => !isBadgeOverlayNode(ch));
+  const overlayNodes = visibleChildren.filter(isOverlayNode);
+  const layoutChildren = visibleChildren.filter((ch) => !isOverlayNode(ch));
   if (layoutChildren.length === 0) return visibleChildren;
 
   const pW = parseSizing(c.width);
@@ -399,8 +399,8 @@ export function computeLayoutPositions(parent: PenNode, children: PenNode[]): Pe
     return out as unknown as PenNode;
   });
 
-  if (badgeNodes.length > 0) {
-    return [...badgeNodes, ...positioned];
+  if (overlayNodes.length > 0) {
+    return [...overlayNodes, ...positioned];
   }
   return positioned;
 }
diff --git a/packages/pen-core/src/layout/normalize-tree.ts b/packages/pen-core/src/layout/normalize-tree.ts
index 1c76e767..4f3ffffe 100644
--- a/packages/pen-core/src/layout/normalize-tree.ts
+++ b/packages/pen-core/src/layout/normalize-tree.ts
@@ -1,5 +1,5 @@
 import type { PenNode, ContainerProps } from '@zseven-w/pen-types';
-import { isBadgeOverlayNode } from '../node-helpers.js';
+import { isOverlayNode } from '../node-helpers.js';
 import { inferLayout } from './engine.js';
 
 /**
@@ -17,8 +17,8 @@ import { inferLayout } from './engine.js';
  *      images with floating overlays, etc.) and we leave it alone.
  *
  * 2. When a frame has an active layout (`vertical` or `horizontal`), strip
- *    `x`/`y` from every non-overlay child. Overlay children (badges, pills,
- *    tags, floating indicators) keep their absolute coordinates.
+ *    `x`/`y` from every non-overlay child. Overlay children (opt-in via
+ *    `role: 'overlay'`) keep their absolute coordinates.
  *
  * Used as a post-generation pass after an AI model produces a subtree. It
  * corrects two common model mistakes:
@@ -58,7 +58,7 @@ export function normalizeTreeLayout(node: PenNode): void {
     // (2) Strip x/y from non-overlay children of active-layout frames.
     if (c.layout === 'vertical' || c.layout === 'horizontal') {
       for (const child of children) {
-        if (!isBadgeOverlayNode(child)) {
+        if (!isOverlayNode(child)) {
           if ('x' in child) delete (child as { x?: number }).x;
           if ('y' in child) delete (child as { y?: number }).y;
         }
@@ -105,9 +105,9 @@ export function normalizeTreeLayout(node: PenNode): void {
  *      still get the vertical fallback, because those are typically
  *      content stacks where verticalization is the right call.
  *
- * Overlay nodes (badges/pills/tags via `isBadgeOverlayNode`) are excluded
- * from the count — they legitimately carry x/y inside auto-layout frames
- * and shouldn't tip the heuristic.
+ * Overlay nodes (opt-in via `role: 'overlay'`, detected by `isOverlayNode`)
+ * are excluded from the count — they legitimately carry x/y inside
+ * auto-layout frames and shouldn't tip the heuristic.
  *
  * This is intentionally conservative: it accepts a few false negatives
  * (some genuinely vertical all-shape stacks will be left un-normalized,
@@ -120,7 +120,7 @@ const COMPOSITION_PRIMITIVE_TYPES = new Set(['frame', 'ellipse', 'path']);
 function hasAbsolutePositionedChild(children: PenNode[]): boolean {
   // Signal 1: explicit numeric x/y on any non-overlay child.
   for (const child of children) {
-    if (isBadgeOverlayNode(child)) continue;
+    if (isOverlayNode(child)) continue;
     const c = child as PenNode & { x?: number; y?: number };
     if (typeof c.x === 'number' || typeof c.y === 'number') return true;
   }
@@ -130,7 +130,7 @@ function hasAbsolutePositionedChild(children: PenNode[]): boolean {
   let nonOverlayCount = 0;
   let primitiveCount = 0;
   for (const child of children) {
-    if (isBadgeOverlayNode(child)) continue;
+    if (isOverlayNode(child)) continue;
     nonOverlayCount++;
     if (COMPOSITION_PRIMITIVE_TYPES.has(child.type)) primitiveCount++;
   }
diff --git a/packages/pen-core/src/node-helpers.ts b/packages/pen-core/src/node-helpers.ts
index de8cf630..8f80c0c0 100644
--- a/packages/pen-core/src/node-helpers.ts
+++ b/packages/pen-core/src/node-helpers.ts
@@ -1,16 +1,23 @@
 import type { PenNode } from '@zseven-w/pen-types';
 
 /**
- * Check if a node is a badge/overlay that uses absolute positioning
- * and should not participate in layout flow.
+ * Check if a node is an overlay that uses absolute positioning and should
+ * not participate in layout flow.
+ *
+ * Requires explicit `role: 'overlay'`. Earlier versions matched on
+ * `role: 'badge' | 'pill' | 'tag'` plus name regexes, but those are
+ * inline-component markers in this repo (see `role-resolver.ts` and
+ * `strip-redundant-section-fills.ts` PROTECTED_ROLES) — pulling them out
+ * of layout flow collapsed them to (0,0) of their parent and stacked
+ * them on top of siblings. `role: 'overlay'` is the dedicated opt-in for
+ * notification dots and true floating decorations.
  */
-export function isBadgeOverlayNode(node: PenNode): boolean {
+export function isOverlayNode(node: PenNode): boolean {
   if ('role' in node) {
     const role = (node as { role?: string }).role;
-    if (role === 'badge' || role === 'pill' || role === 'tag') return true;
+    if (role === 'overlay') return true;
   }
-  const name = (node.name ?? '').toLowerCase();
-  return /badge|indicator|notification[-_\s]?dot|overlay|floating/i.test(name);
+  return false;
 }
 
 /**