Fair Labor Standards Act overtime: FLSA overtime rules, overtime laws by state and overtime pay for salaried employees

The statutory requirement fits in a sentence. What follows it, twelve lines of specification, is where the money is won and lost. Every row below comes from the regulation or the statute, not from a summary of one.

The practical takeaway for a small employer is that betting on being uncovered is a bad bet. A company under $500,000 in revenue can still owe overtime to individually covered staff, and the analysis is done employee by employee. Coverage is also only the first question. The second is whether a given role is exempt, which is a separate test with its own salary floor and its own duties requirements, set out in exempt vs non exempt classification.

Source: US Department of Labor, Wage and Hour Division Fact Sheet 14, and 29 CFR 779.103.

This is where most overtime underpayments are created, and they are almost never deliberate. Payroll multiplies the base hourly rate by 1.5, the employee also earned a production bonus that week, and the overtime was quietly underpaid. The Supreme Court called the regular rate an "actual fact" in Walling v. Youngerman-Reynolds Hardwood Co., and 29 CFR 778.108 makes the consequence explicit: the rate cannot be left to a declaration by the parties. Writing a different rate into a contract does not create one.

If you want the arithmetic done for you rather than described, the overtime calculator derives the regular rate from total weekly remuneration, applies the half time premium, and separates out the portion that counts as qualified overtime compensation under the federal deduction that employers now have to report.

Section 7(e) of the Act requires all remuneration for employment to be included, except payments falling into seven specific statutory exclusions. Only those seven exclusions are authorized, so anything you pay that is not on the exclusion list has to be added in before you divide by hours worked.

The distinction that catches people is discretionary versus nondiscretionary. A bonus is only discretionary if both the decision to pay it and the amount are made at the employer's sole discretion at or near the end of the period, with no prior contract, agreement or promise that caused the employee to expect it. An annual bonus everyone knows is coming, a monthly attendance bonus, a quality bonus published in a handbook: all nondiscretionary, all in the rate.

Premium pay for when a shift runs behaves differently again, and in two opposite directions. A night differential is never excludable at any size, because 29 CFR 778.207(b) names nightshift differentials specifically and requires them in the rate whether they are a percentage or an addition of so many cents per hour. A weekend or holiday premium at time and one-half or more of the bona fide like work rate is excludable under 778.203 and creditable against the overtime owed. Both cases, with worked calculations, are on shift differential pay.

You cannot pay overtime correctly until you know how many hours were worked, and the FLSA's definition of a worked hour is broader than most schedules assume. These rules live in 29 CFR Part 785 and they are the second most common source of back-pay liability after the regular rate.

The mirror image is worth stating too, because it saves money rather than costing it. Paid leave is paid but it is not worked, so vacation, holiday and accrued PTO hours never count toward the 40 hour threshold. Someone who takes 8 hours of PTO and works 36 is paid for 44 hours at straight time with no overtime owed.

Do not carry that rule across to the ACA, where it reverses. Under 26 CFR 54.4980H-1(a)(24) an hour of service includes every hour paid for vacation, holiday, illness, layoff, jury duty or military duty, so the same 8 hours that are invisible here count fully toward the 130 hour full time line that decides who is owed an offer of coverage by an applicable large employer.

The one to read twice is 29 CFR 785.13. It says the mere promulgation of a rule against off-clock work is not enough: management has the power to enforce the rule and must make every effort to do so. A policy in a handbook, unenforced while the work visibly continues, is not a defense. It is closer to an admission that the employer knew.

The meal break row above is the one that generates the most back pay per employee, because the error is silent. An automatic 30 minute deduction against a meal period that was never duty free removes hours from the record before anyone measures the week against 40, so the shortfall shows up as unpaid overtime rather than as a missing break. The federal pay rules for both meal periods and short rest periods, plus the state tables and the California premium, are on our page covering employee break laws by state.

State law can add to the federal floor but never subtract from it, so a multi-state employer owes whichever rule produces more pay. Most states simply track the federal 40-hour standard. Four run a daily rule alongside it, and they are not variations on one theme. Each is genuinely different.

California is the one that produces surprise liabilities, because the daily and seventh-day rules stack. An employee working four 12-hour days owes 16 hours of daily overtime in a week that never crossed 40. Nevada is the subtlest: its daily rule only applies to employees paid under 1.5 times the state minimum wage, which means a raise can remove a daily overtime obligation entirely, and a minimum wage increase can create one. That is a direct link between where you set a band minimum and what a schedule costs you.

Hours cuts have a second consequence that sits outside the FLSA entirely. At an employer with 100 or more employees, a reduction in hours of more than 50 percent in each month of a six-month period is an employment loss under the WARN Act notice requirements, so a deep across-the-board schedule cut can trigger a 60-day notice obligation with nobody terminated at all.

Several of these states also regulate what you publish about pay before anyone is hired. The state pay transparency laws cover which jurisdictions require a good-faith range in the job ad, and the exempt salary threshold by state covers the six states whose exempt salary floors sit above the federal $684 a week.

You can change when the workweek starts, but the change has to be intended to be permanent. Moving the boundary week to week so that hours fall differently is the kind of manipulation that turns an ordinary back-pay claim into a willful one, which extends the lookback from two years to three.

The structural point worth absorbing is that overtime errors are never isolated. A regular rate that omits the production bonus omits it for everyone on that bonus plan, every week, until somebody notices. That is why the phrase "others similarly situated" in 29 USC 216(b) does more work than any other four words in the statute.

Wagelist builds bands from published federal wage statistics rather than pooled employer submissions, so the number behind a classification decision has a citable source and a date. If you want to see where the underlying figures come from, the BLS salary data pillar sets out exactly what the survey measures, and salary bands covers how a minimum, midpoint and maximum are actually constructed.

This page is general information about published wage regulations, not legal advice. State rules add requirements on top of the federal floor and several change every January. Confirm the current position with the relevant agency or with counsel before you change how anyone is paid.