Question 1

What is the FLSA overtime exemption, and who does it apply to?

Accepted Answer

The FLSA overtime exemption is a provision under the Fair Labor Standards Act (29 U.S.C. § 213) that excludes certain salaried employees from the requirement to receive overtime pay for hours worked beyond 40 in a workweek. It applies to employees who meet both a minimum salary threshold and specific duties-test criteria established by the U.S. Department of Labor. The most common exemption categories are executive, administrative, professional, outside sales, and computer employee. Meeting only the salary requirement is not enough; the employee's actual job duties must also satisfy the applicable test. If either condition fails, the employee is non-exempt and entitled to overtime. For a deeper look at the duties side, see exempt vs non-exempt overtime rules.

Question 2

What is the minimum salary for exempt employees under federal law?

Accepted Answer

The federal minimum salary for exempt employees has been $684 per week ($35,568 per year) since January 1, 2020, when the DOL's September 2019 Final Rule took effect. The DOL's April 2024 Final Rule raised the threshold to $844 per week ($43,888 per year) effective July 1, 2024, with a further increase to $1,128 per week ($58,656 per year) scheduled for January 1, 2025. However, a federal court in Texas vacated the January 2025 increase, and the enforced level reverted to $684 per week pending appeal as of late 2024. Check the DOL Wage and Hour Division for the most current enforced figure before making classification decisions.

Question 3

What is the difference between the salary-basis test and the salary-level test?

Accepted Answer

These are two parts of a single DOL framework under 29 C.F.R. Part 541. The salary-basis test asks whether the employee is paid a predetermined, fixed salary that is not subject to reduction based on the quality or quantity of work performed. The salary-level test asks whether that fixed salary meets or exceeds the DOL's minimum threshold (currently $684 per week at the enforced federal level). An employee must pass both tests, plus the applicable duties test, to qualify as exempt. Failing either salary test means the employee is non-exempt regardless of job title or duties.

Question 4

Is there a minimum pay requirement for all salaried employees, or only exempt ones?

Accepted Answer

The FLSA salary-basis and salary-level rules apply only to employees classified as exempt from overtime. Being paid a salary does not automatically make someone exempt. Employers can pay non-exempt employees on a salary basis and still owe them overtime for hours beyond 40 in a workweek. The critical distinction is classification, not pay structure. If you pay a salaried employee below the federal or applicable state threshold, that employee cannot be classified as exempt regardless of duties.

Question 5

What was the minimum salary for exempt employees in 2020?

Accepted Answer

The minimum salary for exempt employees in 2020 was $684 per week ($35,568 per year). This threshold took effect on January 1, 2020, under the DOL's September 2019 Final Rule. It replaced the prior threshold of $455 per week ($23,660 per year), which had been in place since 2004.

Question 6

What is the DOL overtime rule threshold, and how often does it update?

Accepted Answer

The DOL overtime rule threshold is the minimum weekly salary an employee must earn to qualify for a white-collar overtime exemption. The DOL has updated this threshold only a few times in decades: $455 per week in 2004, $684 per week in 2020, and $844 per week (with a planned further increase to $1,128 per week) in the April 2024 Final Rule. There is no fixed update schedule. Changes require formal rulemaking and are subject to legal challenge, as demonstrated by the federal court vacatur of the January 2025 increase. HR teams should monitor DOL rulemaking announcements and consult qualified counsel when new rules are proposed.

Question 7

What is the minimum salary for exempt employees in 2026?

Accepted Answer

As of this writing, the federal minimum salary for exempt employees that would have applied in 2026 was set at $1,128 per week ($58,656 per year) under the DOL's April 2024 Final Rule, with an effective date of January 1, 2025. However, a federal court in Texas vacated that increase, reverting the enforced threshold to $684 per week ($35,568 per year) while the case proceeds on appeal. The threshold that actually applies in 2026 depends on how that litigation resolves. Monitor the DOL Wage and Hour Division for updates, and consult legal counsel before adjusting classifications. See also FLSA salary threshold entry condition not classification.

Question 8

Do any states have a higher minimum salary for exempt employees than the federal level?

Accepted Answer

Yes. Several states set their exempt salary threshold above the federal floor. California ties its threshold to twice the state minimum wage; for 2025, that equals $1,320 per week ($68,640 per year) for employers with 26 or more employees. New York requires $1,237.50 per week in New York City, Nassau, Suffolk, and Westchester counties. Washington State requires $1,332.80 per week for 2025. Colorado and Alaska also exceed the federal level. When a state threshold is higher than the federal floor, the higher state standard applies. Multi-state employers need to track each state's threshold independently. For guidance on multi-state wage rules, see wage and hour compliance multi-state employers.

Question 9

What is the minimum salary for exempt employees in California?

Accepted Answer

California calculates its exempt salary threshold as two times the state minimum wage multiplied by 2,080 hours. For 2025, with a $16.50 state minimum wage for employers of 26 or more, the exempt threshold is $1,320 per week ($68,640 per year). This is significantly higher than the current enforced federal level of $684 per week. California applies its own threshold regardless of federal rules, so employers with California-based employees must meet the state standard even if their operations are headquartered elsewhere (California Department of Industrial Relations).

Question 10

Can an employee earning above the salary threshold still be non-exempt?

Accepted Answer

Yes. Meeting the salary threshold is necessary but not sufficient for exempt status. The employee must also pass the applicable duties test (executive, administrative, professional, outside sales, or computer employee) under 29 C.F.R. Part 541. If the employee's primary duties do not satisfy the test, the employee is non-exempt and entitled to overtime, regardless of salary level. Job titles alone do not determine exemption. The DOL evaluates actual work performed. For a breakdown of how duties tests work, see exempt vs non-exempt overtime rules.

Question 11

What are the primary exemption categories under the FLSA, and what duties do they require?

Accepted Answer

The FLSA recognizes five white-collar exemptions, each with distinct primary-duty requirements. Executive exemption requires managing a department or subdivision and directing the work of at least two full-time employees. Administrative exemption requires office or non-manual work directly related to management or business operations, plus the exercise of independent judgment on significant matters. Professional exemption (learned) requires advanced knowledge in a field of science or learning, customarily acquired through prolonged specialized instruction. Outside sales exemption requires making sales or obtaining orders away from the employer's place of business. Computer employee exemption requires systems analysis, programming, or similar high-level computer work. Each test has additional nuances under DOL regulations.

Question 12

Does the highly compensated employee exemption have a different salary threshold?

Accepted Answer

Yes. The highly compensated employee (HCE) exemption has a higher total annual compensation threshold but a less demanding duties test. Under the 2020 rule, the HCE threshold was $107,432 per year. The DOL's April 2024 Final Rule set it at $132,964 per year (with the January 2025 increase, which was vacated). HCE employees must still receive at least the standard weekly salary and must customarily and regularly perform at least one of the exempt duties from the executive, administrative, or professional tests, but they do not need to meet the full primary-duty standard.

Question 13

What happens if an exempt employee's salary falls below the threshold mid-year?

Accepted Answer

The employee loses exempt status for any workweek in which their salary drops below the applicable threshold. The employer owes overtime for all hours worked beyond 40 in those workweeks. Back-wage liability accrues immediately. This can happen through improper salary deductions, reduced hours, furloughs, or a threshold increase the employer failed to address. Employers should audit current salaries against both federal and applicable state thresholds every time a rule change takes effect, and should avoid deductions from exempt employees' pay that could undermine the salary-basis requirement.

Question 14

Can bonuses or commissions count toward the FLSA salary threshold?

Accepted Answer

Yes, with limits. Under the DOL's 2024 rule framework, up to 10% of the standard salary level may be satisfied by nondiscretionary bonuses, incentive payments, or commissions, provided they are paid at least annually. If the employer does not pay enough in bonuses or commissions to meet the threshold by the end of the 52-week period, the employer has one pay period to make up the shortfall. Discretionary bonuses (those not tied to predetermined criteria) do not count toward the threshold.

Question 15

What payroll records should employers keep to defend an exempt classification?

Accepted Answer

The DOL requires employers to retain payroll records for at least three years. For exempt classification specifically, you should also retain the job description used at the time of classification, the offer letter stating salary and exempt status, a completed duties-test worksheet documenting how the role satisfies the applicable exemption, and records of any salary adjustments. If your time tracking system produces audit trails showing hours, edits, and approvals, those records strengthen your position during a DOL investigation or wage-and-hour dispute. For more on building defensible records, see compliance audit failure incomplete time records.

Question 16

What is the new DOL overtime exemption rule, and is it currently in effect?

Accepted Answer

The DOL's April 2024 Final Rule raised the standard salary threshold in two phases: to $844 per week ($43,888 per year) effective July 1, 2024, and to $1,128 per week ($58,656 per year) effective January 1, 2025. A federal court in the Eastern District of Texas vacated the entire rule, including the July 2024 increase, which reverted the enforced threshold to $684 per week ($35,568 per year) as of late 2024. The DOL may appeal. Employers who had already raised salaries to the higher level are not required to reverse those increases, but they should consult counsel on how to handle classification going forward.

Question 17

What is the back-wage liability risk if an employer misclassifies a non-exempt employee as exempt?

Accepted Answer

The DOL can recover up to two years of unpaid overtime, or three years if the violation is found to be willful. Under 29 U.S.C. § 216(b), the court may also award an equal amount in liquidated damages, effectively doubling the back-wage exposure. Employees may also recover attorney's fees. In a class or collective action involving multiple misclassified employees, the total liability can be significant. The best defense is maintaining clear, contemporaneous documentation of salary levels, duties-test analyses, and payroll records for every exempt role.

Question 18

How should HR teams prepare for future DOL threshold increases?

Accepted Answer

A practical three-step approach: First, audit all exempt roles against the new threshold as soon as a final rule is published, ideally 90 days before the effective date. Second, decide for each affected employee whether to raise their salary above the new threshold or reclassify them as non-exempt with overtime eligibility. Third, update payroll records and notify affected employees in writing before the change date. EasyClocking by WorkEasy Software supports this process through time tracking that captures hours, overtime, and audit trails for every employee, giving you the data foundation to reclassify with confidence if needed.

Question 19

Which state rules override the federal FLSA salary threshold?

Accepted Answer

When a state's minimum salary for exempt employees exceeds the federal floor, the higher state standard applies. As of 2025, California, New York (certain counties), Washington, Colorado, and Alaska all set thresholds above the federal enforced level of $684 per week. Employers operating in multiple states cannot apply a single federal number across all locations. You need to track each state's threshold and apply the higher of the federal or state standard for employees based in that state. State thresholds may also update on a different schedule than federal rules.

Question 20

How does accurate time tracking help with exempt classification audits?

Accepted Answer

Even though exempt employees are not paid based on hours worked, maintaining time records for all employees strengthens your audit position. If the DOL or a court challenges an exemption, having records of actual hours worked helps demonstrate that the employee was genuinely performing exempt-level duties rather than spending most of their time on non-exempt tasks. A system like EasyClocking by WorkEasy Software captures hours, job codes, and edits with full audit trails, so if a classification is ever disputed, you have defensible data rather than reconstructed estimates. This matters especially in construction, manufacturing, and other industries where role boundaries between exempt and non-exempt work can blur on the ground.

FLSA Overtime Exemption Salary Thresholds FAQ

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