Federal overtime exemption threshold revised, but duties test remains the same
In late 2019, the salary threshold for exempting an employee from overtime pay was lowered. In March 2024, the Department of Labor (DOL) raised the threshold, expanding the number of employees eligible for overtime pay. However, by late 2024, the salary level reverted to the previous lower levels established during the first Trump administration in 2019. This updated threshold reduces the number of employees exempt from overtime. While these wage requirements have fluctuated in recent years, one constant remains—the duties test.
What is the duties test?
You should be aware that although the salary threshold has been reinstated to its prior level, the duties test for exemption still applies. This test determines whether an employee qualifies for exemption from overtime based on their specific job duties. Several categories of employees are not eligible for overtime, including those working in executive, administrative, professional, computer, and outside sales roles.
To qualify for overtime exemption, an employee must meet both the salary threshold and pass one of the stringent duties tests established by the DOL. The duties tests vary based on job type, but it’s important to note that overtime compensation is required for hours worked beyond 40 hours in a workweek, paid at a rate of at least one and a half times the regular wage.
Remind me, what is the salary threshold for overtime exemption?
For employees to qualify for overtime exemption, they must generally be salaried, meaning they are paid a fixed amount regardless of hours worked, rather than paid hourly.
The standard minimum salary threshold for many exemptions is $684 per week, or $35,568 annually. Employees who meet this salary requirement must also pass one of the duties tests to quality for exemption.
If employees are paid the minimum salary, do they qualify?
To determine whether your employees are exempt from overtime, they must meet the above-mentioned salary threshold and fall under one of the categories below based on their duties:
Executive exemptions
The primary duties of an executive employee are to manage the enterprise, department, or subdivision. Executive employees must regularly supervise two or more full-time employees and must have the authority to hire or fire employees or recommend these actions.
Administrative exemptions
The primary duties of an administrative employee are the performance of office or nonmanual work directly related to management or business operations. These employees must exercise discretion and independent judgment in matters of significance, and the employee’s role must involve significant decision-making rather than simple, routine work.
Professional exemptions
A professional employee’s primary duties must involve work requiring advanced knowledge in fields such as science, law, medicine, or engineering to qualify for overtime exemption. These employees must have advanced education or training, and the knowledge must be customarily acquired by a prolonged course of specialized intellectual instruction.
Computer employee exemptions
This exemption applies to employees working in computer-related occupations, which include systems analysts, computer programmers, software engineers, and similar computer-oriented roles. These employees must be paid on a salary basis or an hourly rate of at least $27.63 per hour to be exempt from overtime.
Highly compensated employee exemptions. This exemption applies to employees who earn at least $107,432 annually (including at least $684 per week in salary) and perform office or nonmanual work. Further, these employees’ primary duties must include at least one of the exempt duties outlined above (executive, administrative, or professional work).
Are there any employees who are never exempt from overtime?
Certain employees are never exempt from overtime, regardless of their salary level. This includes “blue-collar” workers, such as those who perform manual labor work with their hands, physical skill, and energy. This includes construction workers, electricians, carpenters, mechanics, plumbers, craftsmen, longshoremen, and laborers. These employees are entitled to both minimum wage and overtime pay under the Fair Labor Standards Act (FLSA), even if they earn high wages.
Additionally, overtime exemptions do not apply to first responders. The first responder group includes police officers, detectives, sheriffs, park rangers, firefighters, paramedics, and other similar roles, no matter the employee’s rank or salary.
Keep in mind, this is the minimum standard for compliance
The FLSA sets the minimum wage, workweek, and overtime exemption standards that employers must follow. However, you should also comply with state, local, or other federal laws that establish higher wages, shorter workweeks, or additional overtime exemptions than those specified by the DOL.
