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 (OT) pay provisions.
The final rule took effect Jan. 1, 2020.
What the Federal OT Exemption Rule Means
The OT exemption rule 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 OT exempt but rather nonexempt, and they should receive overtime pay for work hours exceeding 40 in a workweek.
To qualify for OT exemption 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 OT exemption rule, then you must compare the state rule with the federal rule and apply whichever one is most generous to the employee.
We offer outsourced accounting and consulting services to help you navigate these updated laws.
State OT Exemption Laws
Many states have their own overtime pay regulations and OT exemptions. 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 OT exempt and is not entitled to overtime pay under state law.
For example, California, Pennsylvania, New York, and Maine all have their own OT exemption laws.
To illustrate, let’s look at Pennsylvania.
On Oct. 3, 2020, the Pennsylvania Department of Labor and Industry published a final OT exemption 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 OT exemption rule must receive no less than $780 per week instead of the FLSA’s $684.
The criteria for OT exemption 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.
OT Exemption Considerations
When it comes to OT exemption, most states adhere to federal law/the FLSA. If the state is silent on the matter, then federal law applies.
If you have any questions about this information please contact us and a BlueStone Service’s representative will discuss your needs with you and how we can support them.
Updated September 2024
