Are All Salaried Employees Exempt from Overtime?

Employment Attorneys

Posted in on March 18, 2024

The Department of Labor (“DOL”) will soon be raising the salary threshold for exempt employees. Many employees and employers assume that simply by being paid a salary, the employee is exempt from overtime. However, that is not the case. There is a three-part test that must be met in order for an employee to be considered exempt from overtime – being paid a salary is only one component of that test.

Under the Federal Fair Labor Standards Act (“FLSA”) and state employment laws, all employees who work over 40 hours in a week must be paid at an overtime rate of 1.5 times their hourly rate for all hours worked over 40 hours in a given week unless they are considered exempt. The employee is considered exempt from overtime pay if they meet these three requirements:

  1. The employee must be paid on a salary basis;
  2. The employee must be paid at least the designated minimum weekly salary (Under the FLSA that amount is currently $684.00 per week ($35,568.00 annualized) but this is expected to go up); and
  3. The employee must perform certain duties (the most common exemption types are called the executive, administrative and professional exemptions).

The DOL is expected to raise the salary sometime in 2024. Expectations are that the increase is likely to go from $684.00 a week to somewhere around $900.00-$1,000.00 per week (which would equate to $46,800.00-$52,000.00 annualized). This large increase will likely render some previously exempt employees non-exempt. Once the rate is announced, employers will have two choices: either increase weekly salaries for certain employees over the new threshold, or convert them from exempt to non-exempt and pay the employees on an hourly basis, including time and one half for all overtime hours.

Keep in mind that each state and in some cases, specific counties, may have their own standards of exempt salary thresholds that may be higher than the FLSA. For example, in New York City, the threshold for exempt status is currently $58,500.00.

If you have questions about exempt employee status, as either an employee or an employer, reach out to one of the employment law attorneys at Baker, Braverman & Barbadoro, P.C. today for a consultation.