The federal Fair Labor Standards Act (FLSA) requires that employers pay nonexempt employees overtime for all hours worked in excess of 40 hours in a workweek. Some states require overtime in additional circumstances. However, there are exemptions from these requirements for employees who meet certain salary and duties tests. Here are some key things to know for both federal exemptions and state exemptions from overtime for 2024.
Federal exemptions from overtime
The FLSA allows for exemptions from the federal overtime (and minimum wage) requirements for certain employees who work in administrative, professional and executive jobs (known as "exempt" employees). To be considered "exempt," these employees must generally satisfy three tests:
- Salary-level test: Employers must pay employees a salary of at least $684 per week. The FLSA's minimum salary requirement is set to remain the same to start 2024, but the United States Department of Labor (DOL) has published a proposed rule that would increase the minimum salary requirement sometime in 2024 (see below).
- Salary-basis test: 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.
- Duties test: The employee's primary duties must meet certain criteria.
Proposed increase to federal minimum salary requirement
On August 30, 2023, the DOL released a proposed rule that, if finalized, would increase the minimum salary required to $1,059 per week in order for administrative, professional and executive employees to be considered exempt from the FLSA overtime pay requirements.
The proposed rule was open for public comment until November 7, 2023. The DOL will now review the comments before issuing a final rule, which is expected sometime in 2024. The final rule is likely to be challenged in court. We will be monitoring the status of the proposed rule closely and updating our FLSA and Overtime Exemption Rule Guide as developments unfold.
State exemptions from overtime
Many states have their own salary and duties tests for determining whether an employee is exempt from overtime under state rules. Generally, if state law is more protective (i.e., requires a higher salary amount or has duties tests that are more difficult to satisfy), then state law should be followed. Six states have minimum salary requirements for overtime exemption that both exceed the current federal level and will increase on January 1, 2024. The changes are summarized below.
Alaska (updated 11.15.2023)
To be classified as exempt from overtime under state law (Alaska Statute 23.10.055), bona fide administrative, professional and executive employees must satisfy certain salary and duties tests. The minimum salary required for exemption is two times the state minimum wage for the first 40 hours of employment each week. As a result of a change in the state’s minimum wage, the minimum salary required for these exemptions under state law will increase to $938.40 per week on January 1, 2024.
To qualify for the administrative, professional and executive exemptions in California, employees must meet certain salary and duties tests and must be paid at least twice the state minimum hourly wage based on a 40-hour week. The state's minimum wage will increase on January 1, 2024. As a result, employers must pay a salary of at least $1,280 per week beginning January 1, 2024 to qualify for the exemption.
Computer software employees may be paid on an hourly or a salary basis in order to qualify for exemption from California's overtime requirements. Beginning January 1, 2024, computer software employees who are paid on an hourly basis must earn at least:
- $55.58 per hour (for all hours worked); or
- A monthly salary of $9,646.96; and
- An annual salary of $115,763.35.
In Colorado, employees must meet certain salary and duties tests to qualify for overtime exemption. As a result of the Colorado Overtime & Minimum Pay Standards Order, the minimum salary required to qualify for the executive/supervisor, administrative and professional exemptions under state law will increase to $1,057.69 per week on January 1, 2024.
Under the state’s exemption for highly technical computer employees, the employee may be paid by salary (at least $1,057.69 per week in 2024) or by the hour. The minimum hourly rate for 2024 for these employees hasn’t been published yet.
Note: In Colorado, an exempt employee’s salary generally must also be sufficient to satisfy the minimum wage for all hours worked in a workweek. This is true in certain other states as well, some of which will have a new minimum wage in 2024. Employers may want to consult legal counsel about how this rule may impact them.
To be classified as exempt from overtime under state law, administrative, professional and executive employees must satisfy certain salary and duties tests and receive a salary that exceeds 3,000 times the state minimum wage divided by 52. Due to an increase in the state's minimum wage, the minimum salary required for the administrative, professional and executive exemptions from overtime under state law will increase to $816.35 per week on January 1, 2024.
To be classified as exempt from New York's overtime requirements, executive and administrative employees must meet minimum salary requirements and satisfy certain duties tests.
For these two exemptions, the state typically has set the minimum salary requirement at or about 75 times the state minimum wage. The state’s minimum wage will increase on January 1, 2024.
As a result of the new minimum wage, the state has proposed increasing the minimum salary requirement for the executive and administrative exemptions to $1,200 per week on January 1, 2024 in New York City and Nassau, Suffolk, and Westchester Counties. If finalized, the state’s proposal would also increase the minimum salary requirement for the executive and administrative exemptions to $1,124.20 per week on January 1, 2024 in areas other than New York City and Nassau, Suffolk, and Westchester Counties.
Note: There is also a professional exemption under state law. For the professional exemption, employees must satisfy certain duties tests, but there is no minimum salary requirement under state law. Federal law currently establishes a minimum salary of $684 per week for the professional exemption. Employers seeking to classify employees as exempt from overtime should ensure employees meet both federal and state exemption criteria.
In Washington, employees must satisfy certain salary and duties tests to be classified as exempt from overtime under state law. As a result of a new state minimum wage, the salary threshold used to determine which workers are exempt from overtime under state law will also increase to $1,302.40 per week effective January 1, 2024.
Note: Employers may pay exempt computer professionals by the hour, provided they pay at least 3.5 times the minimum wage ($56.98 per hour in 2024).
Before classifying and treating any employee as exempt from overtime, employers should confirm that the employee satisfies all applicable tests for overtime exemption under federal and state laws. If an employee is covered by both federal and state law but doesn't meet both sets of tests, employers should consult with counsel to determine how they should classify the employee in that particular situation.
More than 20 states and nearly 40 local jurisdictions will increase their minimum wage rates on January 1, 2024. Here is a summary of these changes and guidelines to help you comply with your minimum wage requirements.