The Fair Labor Standards Act (FLSA) outlines the minimum wage and overtime requirements for salaried employees in the United States. While the FLSA requires that most employees be paid at least the federal minimum wage and receive overtime pay for hours worked beyond 40 per week, there are exemptions for certain salaried employees. These exemptions are based on job duties, salary levels, and the nature of the employer's business. State laws, such as those in Colorado, may also have specific regulations governing the rights and obligations of salaried employees, including minimum wage and overtime requirements. Understanding the interplay between federal and state laws is crucial for determining the applicability of minimum wage laws to salaried employees in a given state.
Characteristics | Values |
---|---|
Salary basis | A predetermined fixed amount of compensation at regular intervals, such as weekly or less frequently |
Salary deductions | Permissible in certain circumstances, e.g. for unpaid disciplinary suspensions of one or more full days |
Overtime eligibility | Depends on the state; salaried employees are generally exempt from overtime but may be eligible in certain cases |
Minimum wage laws | Salaried employees are generally exempt from minimum wage laws but must be paid at least $684 per week to maintain exemption status |
Work hours | No specific limits, but salaried employees are expected to fulfill their duties regardless of hours worked |
Leave entitlements | Vary by state; for example, in Colorado, salaried employees are entitled to sick leave, public health emergency leave, jury duty leave, and more |
What You'll Learn
Salaried employees and minimum wage requirements
The Fair Labor Standards Act (FLSA) governs the process that Compensation Analysts use to determine whether a position is either eligible for over-time pay for hours worked in excess of 40 per week (non-exempt) or is paid a flat sum for hours worked, even if they exceed 40 hours within a workweek (exempt). The FLSA identifies two types of employees: non-exempt employees and exempt employees.
Non-exempt employees are required to account for time worked and sick leave, vacation, and other leave on an hourly and fractional hourly basis. These employees must be paid overtime at the premium rate (time-and-one-half) for actual time worked in excess of 40 hours per week.
Exempt employees are exempt from the FLSA minimum wage and overtime provisions. They are paid an established monthly or annual salary and are expected to fulfill the duties of their positions regardless of the hours worked. They do not receive premium overtime, straight overtime, or compensatory time for working more than 40 hours in a workweek.
To be considered exempt, employees must generally satisfy three tests: the salary-level test, the salary-basis test, and the duties test.
The salary-level test requires employers to pay employees a salary of at least $684 per week. The salary-basis test states that, with very limited exceptions, the employer must pay employees their full salary in any week they perform work, regardless of the quality or quantity of the work. The duties test defines three categories of jobs that may be exempt from the overtime entitlement: executive, administrative, and professional.
In addition, certain salaried employees are exempt from the minimum wage, overtime, and meal and rest break requirements if they meet specific salary thresholds. For example, in Colorado, executive or supervisor employees, and administrative employees, are exempt if they earn a salary that exceeds the equivalent of the minimum wage, currently set at $1,057.69 per week or $55,000 per year.
It is important to note that state laws may have different or additional requirements for salaried employees and minimum wage requirements. For example, in California, computer software employees may be paid on an hourly or salary basis to qualify for exemption from overtime requirements, with specific salary thresholds for each.
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Salaried employees and overtime pay
However, certain employees are exempt from the minimum wage and overtime pay requirements, including bona fide executive, administrative, and professional employees. These exemptions are often referred to as the "white-collar" or "EAP" exemptions. To qualify for these exemptions, employees must generally satisfy three tests: a salary-level test, a salary-basis test, and a duties test.
The salary-level test requires that employers pay employees a salary of at least $684 per week. The salary-basis test states that, with very limited exceptions, employees must be paid their full salary in any week they perform work, regardless of the quality or quantity of work completed. Finally, the duties test specifies that the employee's primary duties must meet certain criteria to be exempt from overtime pay.
It is important to note that there are also exemptions for outside sales employees and computer professional employees. Outside sales employees are not subject to a minimum salary requirement, while computer professional employees can be exempt if they earn a salary of at least $684 per week or an hourly wage of at least $27.63.
While the FLSA establishes the federal guidelines, it is worth noting that many states have their own salary and duties tests for determining overtime exemption eligibility. These state criteria are often more stringent than the federal requirements. For example, in California, employees must be paid at least twice the state minimum hourly wage based on a 40-hour workweek to qualify for the administrative, professional, and executive exemptions.
In summary, salaried employees in the United States may be eligible for overtime pay depending on their job classification, salary level, and the specific regulations in their state. The FLSA and its exemptions outline the general framework, but it is essential to refer to state laws for a comprehensive understanding of overtime pay eligibility for salaried employees.
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Salary basis test
The salary basis test is a series of stipulations that may exempt an employee from being eligible for overtime pay. It applies to salaried employees, who are defined as those receiving a predetermined, fixed amount of compensation at regular intervals, such as weekly or less frequently. Salaried employees are generally not entitled to overtime pay, however, this depends on their salary level and the state in which they are employed.
The salary basis test states that an employee must be paid a predetermined, fixed salary that is not subject to reduction because of variations in the quality or quantity of their work. This means that the employee's salary cannot go up or down based on their performance. The predetermined amount must be paid for any week in which the employee performs work, regardless of the number of days or hours worked. However, employers are not required to pay employees for any week in which they perform no work.
There are "permissible" and "impermissible" reductions in salary basis pay. Permissible reductions do not affect the exemption status of an employee, whereas impermissible reductions can. Permissible deductions include those required by law (e.g. taxes and garnishments), deductions agreed upon in writing (e.g. loans or equipment costs), and deductions for union dues. On the other hand, impermissible deductions include those for property damage or depreciation, and fines for employee behaviour or actions.
It is important to note that certain jobs, such as doctors, lawyers, and teachers, are exempt from the salary basis pay requirement. These employees are exempt even if they are paid an hourly wage rather than a salary.
In addition to the salary basis test, there is also a salary-level test and a duties test that must be satisfied for an employee to be considered exempt from overtime pay. The salary-level test specifies a minimum salary amount, which is currently set at $684 per week by the Fair Labor Standards Act (FLSA). The duties test evaluates whether the employee's primary duties meet certain criteria, such as executive, administrative, or professional duties.
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State-specific minimum wage laws
California
In California, salaried employees fall into two categories: exempt and non-exempt. Non-exempt salaried employees are protected by California minimum wage laws, which, as of 2024, is $16 per hour. Employers must pay these employees at least the minimum wage for all hours worked. Additionally, non-exempt salaried employees are entitled to overtime pay for any hours worked beyond the standard workweek of 40 hours.
On the other hand, exempt employees are not covered by most California wage and hour laws. To qualify as exempt, employees must have executive, administrative, or professional duties, exercise discretion and independent judgment in their work, and earn a minimum salary equivalent to twice the state minimum wage based on a 40-hour workweek. The minimum annual salary for an exempt employee in 2024 is $66,560.
Texas
In Texas, the minimum wage is set at the federal minimum wage of $7.25 per hour. This applies to all employees except live-in domestic employees, inmates, employees providing domestic services outside their employer's home, employees who are family members of their employer, and employees of select recreational and amusement businesses.
Salaried employees in Texas are either exempt or non-exempt, depending on the nature of their work, eligibility for overtime, compensation, and payment structure. While most salaried employees in Texas are exempt from overtime pay, there are exceptions. Executives, professionals, and employees in administrative positions may be eligible for overtime if they earn less than $844 per week or $43,888 annually and meet other specific criteria.
New York
In New York, the minimum wage rates vary across different parts of the state. For example, New York City, Long Island, and Westchester have different minimum wage rates than the rest of the state. The minimum wage is based on the location where the employee performs the work, regardless of the employer's main office location.
While nearly every employer in New York State must abide by the minimum wage laws, there are specific exceptions for certain employees and public entities. Additionally, New York State's minimum salary requirements for overtime-exempt administrative and executive employees increase whenever the state's minimum wage increases.
Washington
In Washington, salaried employees are classified as either exempt or non-exempt, depending on whether they are subject to the state's minimum wage regulations. Non-exempt salaried employees are entitled to a minimum wage of $16.28 per hour and overtime pay for hours worked beyond 40 hours in a workweek. Exempt employees, on the other hand, are not bound by the state's minimum wage laws and are not eligible for overtime pay.
The minimum salary threshold for an exempt employee in Washington is $1,302.40 per week or $67,724.80 annually. To qualify for exempt status, employees must meet specific criteria related to compensation, work duties, and salary level as outlined by the Fair Labor Standards Act (FLSA).
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Employee exemption criteria
In the United States, the Fair Labor Standards Act (FLSA) outlines the criteria for employee exemption from minimum wage and overtime pay requirements. To be considered "exempt", employees must generally satisfy three tests: the salary-level test, the salary-basis test, and the duties test.
Salary-Level Test
Employees must be paid a salary of at least $684 per week. This amount is expected to increase, with the Department of Labor set to publish a proposed rule. State-specific changes have also been implemented, with Alaska, California, Colorado, New York, and Washington all increasing their minimum salary requirements for exemption.
Salary-Basis Test
With very limited exceptions, employers must pay employees their full salary in any week they perform work, regardless of the quality or quantity of the work. Being paid on a "salary basis" means an employee regularly receives a predetermined amount of compensation each pay period, which cannot be reduced due to variations in the quality or quantity of their work.
Duties Test
The employee's primary duties must meet certain criteria. For example, to qualify for the executive employee exemption, the employee's primary duty must be managing the enterprise or a department within the enterprise, and they must customarily direct the work of at least two or more other full-time employees.
Exempt Employees
The FLSA provides exemptions from minimum wage and overtime pay requirements for certain "white-collar" employees, including executive, administrative, professional, and outside sales employees. Additionally, certain computer employees are exempt, with specific salary requirements for exempt computer professionals.
It is important to note that these exemptions are narrowly construed, and employers bear the burden of supporting the actual application of an exemption. Job titles do not determine exempt status, and employees' specific job duties and salaries must meet all the requirements of the Department's regulations.
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Frequently asked questions
Minimum wage laws do apply to salaried employees, but there are exemptions for certain employees who work in administrative, professional, and executive jobs. These employees are known as "exempt" employees and must generally satisfy three tests: the salary-level test, the salary-basis test, and the duties test.
The salary-level test requires employers to pay employees a salary of at least a certain amount per week, which is set by the federal government or state government. As of 2023, the federal minimum salary requirement is $684 per week, but this may change.
The salary-basis test requires employers to pay employees their full salary in any week they perform work, regardless of the quality or quantity of the work. This means that deductions from an employee's salary may result in the employer losing the exemption.