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Laurie Friedman
Laurie Friedman
President Payroll | PEO Division
IndustryNewsletters
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An Overview of Federal and State Overtime Exemption Laws

 

On Sept. 24, 2019, the U.S. Department of Labor issued a final rule increasing the salary threshold for executive, administrative and professional employees from $455 per week to $684 per week. These "white-collar" employees are exempt from the Fair Labor Standards Act's overtime pay provisions. The final rule took effect Jan. 1, 2020.

What the federal overtime exemption rule means

It means that if you have FLSA-exempt executive, administrative and professional employees, you do not have to pay them overtime for more than 40 hours worked in a workweek — as long as you pay them at least $684 per week (or $35,568 per year).

If you pay them less than $684 per week, then they are no longer exempt but rather nonexempt, and they should receive overtime pay for work hours exceeding 40 in a workweek.

To qualify for exempt status, the executive, administrative or professional employee must satisfy the FLSA's job duties test for their position and their pay cannot be less than $684 per week. Certain employees, such as outside salespeople, only need to satisfy the FLSA's job duties test in order to be deemed exempt; there's no minimum pay threshold.

Now, if your employees work in a state that has its own overtime exemption rule, then you must compare the state rule with the federal rule and apply whichever one is most generous to the employee.

State overtime exemption laws

Many states have their own overtime pay regulations. To be excluded from the state's overtime pay regulations, the employee must satisfy the state-required minimum pay threshold and/or the job duties test. If the employee meets these requirements, he or she is exempt and is not entitled to overtime pay under state law.

For example, California, Pennsylvania, New York and Maine all have their own overtime exemption laws.

To illustrate, let's look at Pennsylvania.

On Oct. 3, 2020, the Pennsylvania Department of Labor and Industry published a final rule progressively increasing the pay threshold for exempt executive, administrative and professional employees as follows:

  • $684 per week, starting Oct. 3, 2020.
  • $780 per week, starting Oct. 3, 2021.
  • $875 per week, starting Oct. 3, 2022.

On Oct. 3, 2021, Pennsylvania's pay threshold for exempt employees will eclipse the FLSA's. Therefore, on that date, Pennsylvania employees who are subject to the state's overtime exemption rule must receive no less than $780 per week instead of the FLSA's $684.

The criteria for exempt status in Pennsylvania are available in the state's Minimum Wage Act Exemption document.

For overtime exemption laws in your specific region, contact the state department of labor.

Considerations

When it comes to overtime exemption, most states adhere to federal law/the FLSA. If the state is silent on the matter, then federal law applies.


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Our firm provides the information in this e-newsletter for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation. The information is provided "as is," with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.
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