Overtime Rules Explained: FLSA Exempt vs Non-Exempt

Under the Fair Labor Standards Act (FLSA), most US workers must be paid 1.5x their regular hourly rate for any hours worked above 40 in a workweek. This is called the "overtime premium" or "time and a half."

The key word is "most." Two categories of workers are exempt from the overtime requirement:

1. Workers earning above the salary threshold (currently $58,656/year as of January 2025; phased increase from $43,888 set in July 2024 reverted by court ruling, then partially reinstated)
2. Workers whose primary duties qualify as executive, administrative, professional, computer, or outside sales (the "duties test")

To be legally classified as exempt and denied overtime, a worker must meet BOTH criteria — earn above the salary threshold AND perform exempt-classified duties. Many employers focus only on salary and ignore duties, leading to widespread misclassification.

The salary threshold for FLSA exemption is regulated by the Department of Labor. Recent history:

• 2019: $35,568/year ($684/week) — Trump administration update
• July 2024: $43,888/year ($844/week) — Biden administration first phase
• January 2025: $58,656/year ($1,128/week) — Biden second phase
• November 2024 court ruling: Texas federal judge struck down the Biden updates, reverting threshold to $35,568
• 2025-2026: ongoing litigation; threshold currently in flux

As of 2026, the operational threshold depends on jurisdiction. Federal courts have been asked to clarify whether the Biden updates remain in effect. State-level thresholds (some states have their own, higher salary tests) continue regardless. California's threshold is $66,560 in 2026 (2x state minimum wage × 40 hours × 52 weeks).

If you earn between $35,568 and $66,560, your overtime eligibility depends on whether your state has a higher threshold and whether the latest federal court rulings apply. Ask HR for clarification or consult an employment attorney.

Even if you earn above the salary threshold, you're only legally exempt if your primary duties fit one of these categories:

• Executive: primary duty is management of an enterprise or department; regularly directs the work of at least 2 full-time employees; has authority to hire and fire (or recommendations are given particular weight)
• Administrative: primary duty is office or non-manual work directly related to management or general business operations; exercises discretion and independent judgment on significant matters
• Professional (learned): primary duty requires advanced knowledge in a field of science or learning, customarily acquired through prolonged specialized intellectual instruction
• Professional (creative): primary duty requires invention, imagination, originality, or talent in a recognized creative field
• Computer: systems analyst, programmer, software engineer, or similar; primary duty is application of systems analysis or design
• Outside sales: primary duty is making sales away from employer's place of business

The keywords are "primary duty" and "discretion and independent judgment." A person whose primary job is following procedures and getting approval for decisions is generally NOT administratively exempt, regardless of title or salary.

Department of Labor enforcement actions consistently identify these jobs as commonly misclassified (workers who should receive overtime but are denied it):

• Assistant managers in retail and food service — many "manage" no employees and have no hire/fire authority. Burger King, Subway, and others have settled multi-million dollar misclassification suits.
• Junior IT and tech support — help desk and IT support roles often don't meet the "systems analysis" requirement for the computer exemption.
• Insurance adjusters — heavily litigated; sometimes exempt, often not depending on independent judgment.
• Loan officers — DOL has consistently ruled most loan officers are non-exempt despite industry practice.
• Pharmaceutical sales reps — Supreme Court ruled in 2012 they qualify as outside sales, but the issue is unsettled.
• "Salaried" production workers — manufacturing workers paid on a weekly salary basis but performing hourly-eligible duties.
• Junior engineers in routine roles — recent grads doing routine drafting or testing rarely meet the "professional" or "creative" tests.

If you suspect you're misclassified, you can file a complaint with the Department of Labor's Wage and Hour Division. The DOL can recover up to 2 years of back overtime pay (3 years if willful), plus liquidated damages equal to the back pay (effectively doubling the recovery).

"Comp time" or "compensatory time off" is the practice of giving employees time off in lieu of overtime pay. In the federal government and some state and local government employers, comp time is legal under specific FLSA rules. In the private sector, comp time is illegal.

The FLSA explicitly requires non-exempt private-sector employees to be paid in cash (or check or direct deposit) at 1.5x their regular rate for overtime hours. Banking time off in lieu of overtime pay is a violation, regardless of whether the employee agreed to the arrangement.

Common employer workarounds that are also illegal:

• "Salary plus 5 hours of mandatory overtime included" (must still pay overtime if hours exceed 40)
• "Take-home work doesn't count" (work is work, regardless of location)
• "Off-the-clock email" (yes, it counts if you're answering work emails after hours as a non-exempt worker)
• "Lunch break automatically deducted even if you worked through it" (illegal if you actually worked during the deducted time)

Workers who suspect comp time or other overtime violations should document their hours carefully and consult an employment attorney or the DOL.

Several states have overtime rules stricter than federal:

• California: requires daily overtime above 8 hours (1.5x), double-time above 12 hours, and overtime on the 7th consecutive day. California's salary threshold is $66,560 (2x state minimum).
• Alaska: daily overtime above 8 hours.
• Nevada: daily overtime above 8 hours for workers earning less than 1.5x minimum wage.
• Colorado: daily overtime above 12 hours, plus salary threshold higher than federal.
• New York: $1,200/week salary threshold for executive/administrative exemptions in NYC and Long Island/Westchester.

If you work in any of these states, your overtime rights may be broader than federal law alone. Always check both federal and state rules.