Understanding Labor Laws: Salaried Employees' Rights Explained

Labor laws vary from state to state in the US, and salaried employees are subject to different rules than hourly-paid workers. Salaried employees receive a fixed amount of pay, usually weekly, bi-weekly, or monthly, regardless of the number of hours worked. This means that salaried employees are typically paid for 40 hours a week, even if they work fewer hours. However, they are usually not entitled to overtime pay for working more than 40 hours per week.

In the US, salaried employees can be classified as either exempt or non-exempt, depending on their job duties, pay rate, and payment structure. This classification determines their eligibility for overtime pay and other benefits. For example, in California, non-exempt salaried employees are eligible for overtime pay, while exempt salaried employees are not.

It's important to note that labor laws can be complex and may change over time. Therefore, it's always a good idea to refer to the specific labor laws in your state or consult with legal or HR professionals for the most accurate and up-to-date information.

Overtime pay

Non-exempt salaried employees are generally entitled to overtime pay. To calculate the overtime rate for these employees, their weekly salary is converted into an hourly wage equivalent by dividing the weekly salary by the number of hours the salary is intended to cover. This hourly rate is then used to calculate the additional pay for hours worked beyond the standard workweek.

On the other hand, some salaried employees may be classified as exempt from overtime pay. To qualify for this exemption, employees must meet specific criteria. Firstly, they must earn a minimum salary, which is currently set at $684 per week or $43,888 annually. This threshold will increase to $58,656 per year starting in 2025. Additionally, these employees must hold specific positions that fall under the executive, administrative, or professional categories. Computer employees are also exempt from overtime pay if they earn at least $844 per week or $27.63 per hour.

It is important to note that the eligibility criteria and regulations regarding overtime pay may vary across different states in the US. For example, in California, salaried employees classified as exempt must earn a minimum annual salary of $66,560, which is higher than the federal threshold.

To protect the rights of salaried employees, there are laws in place, such as the Payment of Wages Act in Tennessee, which imposes penalties on employers who fail to properly pay overtime wages. Employees have the right to seek compensation and may be able to recover up to double the amount of unpaid overtime wages, along with associated costs and attorney's fees.

Exempt vs non-exempt

The main difference between exempt and non-exempt employees in the U.S. concerns how they are paid and whether they are eligible for overtime pay. There are also tax implications and potential penalties for misclassification to consider when complying with federal and state wage and hour laws.

Exempt employees are "exempt" from the Fair Labor Standards Act's (FLSA) overtime regulations and, therefore, are not entitled to overtime pay. They usually hold administrative, professional, or executive positions and are paid a regular salary, distributed in equal amounts at the end of every pay period, but they don't qualify for minimum wage. Certain criteria must be met for an employee to be classified as exempt from FLSA wage and overtime standards. For example, they must be paid at least a certain amount ($844 per week or $43,888 per year as of April 23, 2024), and their job duties must primarily involve work that meets one of the FLSA's exemption criteria.

Non-exempt employees are "not exempt" from FLSA provisions, so they are eligible for minimum wage and overtime pay. They are typically paid hourly and perform more manual or technical duties. They are entitled to overtime pay for any hours worked beyond 40 in a workweek (i.e., seven consecutive 24-hour periods).

There are three tests for classifying an employee as exempt or non-exempt: the salary basis test, the salary level test, and the job duties test.

• Salary basis test: Verifies an employee is being paid a fixed amount each week regardless of the number of hours worked.
• Salary level test: Confirms an employee is being paid at least $684 per week.
• Job duties test: Ensures an employee's job duties are consistent with exemption status, such as administrative, professional, and executive jobs.

While it is possible to reclassify an employee from exempt to non-exempt or vice versa, misclassifying an employee can be very costly. Employers are ultimately responsible for defending a role's exempt status if it is ever challenged, and misclassifications could result in legal action and penalties.

In addition to federal regulations, some states have their own unique wage and hour laws that affect how exempt and non-exempt employees are classified. For example, California's minimum annual salary to qualify for an exempt employee is $66,560 as of 2024, and Tennessee follows the federal minimum salary threshold established by the FLSA.

Minimum wage laws

Salaried employees, who receive a predetermined fixed amount of compensation at regular intervals, are also subject to minimum wage laws. The applicability of these laws depends on whether the salaried employee is classified as exempt or non-exempt. Non-exempt salaried employees are typically protected by minimum wage laws and are entitled to receive at least the minimum wage for all hours worked. On the other hand, exempt salaried employees may be exempt from minimum wage requirements if they meet certain criteria.

To be considered exempt from minimum wage laws, employees generally need to satisfy three tests: the salary-level test, the salary-basis test, and the duties test. The salary-level test specifies a minimum salary threshold, which is currently set at $684 per week by the FLSA. This means that to be exempt, an employee must earn at least this amount as their predetermined salary. The salary-basis test requires that employers pay the full salary in any week the employee performs work, regardless of the quality or quantity of the work. Lastly, the duties test pertains to the specific job duties of the employee, encompassing executive, administrative, or professional responsibilities that require the exercise of discretion and independent judgment.

It's important to note that certain occupations, such as outside sales, computer professionals, and teachers, may have their own exemption criteria. For example, outside sales employees are not subject to a minimum salary requirement for exemption, while computer professionals can be exempt if they earn at least $684 per week or $27.63 per hour. Additionally, specific states like California and Colorado have their own salary thresholds for exempt employees, which are higher than the federal minimum.

While salaried employees are subject to minimum wage laws, the specific regulations and thresholds can vary based on location and the nature of the job. It's always advisable to refer to the labor laws of the relevant state or jurisdiction for the most accurate and up-to-date information.

Breaks and leave entitlements

Federal Law

According to federal law, employers are not required to provide their employees with lunch or coffee breaks. However, if they do offer short breaks, typically lasting 5 to 20 minutes, these breaks are considered compensable work hours and are included in the calculation of total hours worked during the workweek. This is important for determining if overtime was worked. On the other hand, meal periods, which usually last at least 30 minutes, are not considered work time and are not compensable.

State Laws

While federal law does not mandate meal or rest breaks, many states have their own laws that address employee entitlement to breaks. These laws vary from state to state and may apply only to certain industries or types of workers.

For example, in California, all employees who work more than five hours a day are entitled to at least 30 minutes of break time. In Connecticut, employees who work at least 7.5 hours a day are entitled to a 30-minute break. In Maine, a 30-minute break is required for employees working more than six hours a day.

In Massachusetts, employees who work more than six hours during a calendar day are entitled to at least a 30-minute meal break, during which they must be free of all duties and free to leave the workplace. This break may be unpaid, and employers may require workers to take their meal breaks. However, if an employee works through their meal break at the request of the employer, they must be compensated for that time.

In Tennessee, employees must be given a 30-minute unpaid meal or rest period if they are scheduled to work six consecutive hours, unless their workplace naturally allows for sufficient rest or breaks, such as in the food/beverage industry or security positions.

Salaried Employees

While the information above applies to employees in general, it is important to note that the specific break entitlements for salaried employees may vary depending on the state and the company's policies. Salaried employees are typically classified as either exempt or non-exempt, which determines their eligibility for overtime pay and other benefits.

Non-exempt salaried employees are generally entitled to overtime pay and must be paid at least the minimum wage for all hours worked up to 40 in a workweek. On the other hand, exempt salaried employees may not be eligible for overtime pay and typically receive the same pay each pay period, regardless of the number of hours worked.

In terms of breaks and leave entitlements, non-exempt salaried employees would fall under the federal and state guidelines mentioned earlier. For exempt salaried employees, while there is no federal mandate for meal or rest breaks, some states may have specific laws that apply to this group. Additionally, companies may have their own policies regarding break times for exempt salaried employees.

Leave Entitlements

In addition to break entitlements, salaried employees may also be entitled to various types of leave depending on the state and company policies. For example, in Massachusetts, workers have the right to earn and use up to 40 hours of sick time per year. They also have the right to take up to 24 hours of unpaid leave every 12 months for certain family-related activities, such as a child's school or doctor's appointment.

In Tennessee, salaried employees are entitled to annual leave, sick leave, maternity leave, holiday leave, jury duty leave, voting leave, bereavement leave, educational leave, military leave, and special leave without pay. The amount of annual leave earned per month depends on years of service, and sick leave allows full-time employees to accumulate one day per month for personal illness, medical appointments, or caring for family members.

It is important to note that the information provided here may not be exhaustive, and the laws and regulations regarding breaks and leave entitlements for salaried employees can change. Therefore, it is essential to review the specific laws and policies applicable to your state and industry.

Termination of employment

Salaried employees are not necessarily exempt from labor laws, and they are still subject to termination of employment. While the specifics of termination may vary depending on the region and the nature of employment, there are some general principles that apply.

In most cases, employment is considered "at-will", meaning that an employer can terminate an employee at any time and for any reason. However, this termination must be carried out in a way that does not violate the employee's rights. For example, in the United States, employers are required to provide a final paycheck within a certain time frame and offer the option of continuing health insurance coverage under the Consolidated Omnibus Budget Reconciliation Act (COBRA). Similarly, in Canada, employers must provide at least two weeks' written notice or pay in lieu of notice for individual terminations. For group terminations, additional requirements, such as notifying the Labour Program's Head of Compliance and Enforcement, come into play.

It is important to note that termination of employment must not be discriminatory or retaliatory. Federal and state laws in the United States, as well as laws in other countries, prohibit employment discrimination based on race, age, national origin, disability, sexual orientation, or religion. Additionally, employers cannot terminate an employee for whistleblowing or reporting issues like sexual harassment or discrimination.

Salaried employees who believe they have been wrongfully terminated can seek legal advice and assert their rights. They may be eligible for unemployment compensation benefits and, in some cases, severance pay.

Frequently asked questions