FLSA Overtime Rules

What are FLSA Overtime Rules?

The Fair Labor Standards Act (FLSA) is the federal law that sets minimum wage and overtime pay requirements for most U.S. employers. Its overtime provision requires covered employees to receive one and one-half times their regular rate of pay for every hour worked beyond 40 in a single workweek.

A workweek is a fixed, recurring period of 168 hours that an employer defines. It does not need to match the calendar week or a pay period. Understanding this distinction matters when you compare straight-time pay to overtime pay across a payroll cycle.

Who is Covered Under the FLSA Overtime Rules?

Coverage hinges on classification. Employees are either non-exempt, meaning they are entitled to overtime, or exempt, meaning they are not. Getting this wrong is one of the most common and expensive mistakes an HR team can make.

Reviewing the difference between exempt and non-exempt classification before you build a job description prevents costly reclassification down the road.

• Non-exempt employees: paid hourly or salaried, entitled to overtime for hours over 40 per week
• Exempt employees: paid a fixed salary, not entitled to overtime regardless of hours worked
• Misclassification risk: applies to both directions, not just underpaying non-exempt staff

How do You Calculate Overtime Pay Under the FLSA?

Overtime pay equals the employee's regular rate multiplied by 1.5, then multiplied by the number of overtime hours worked in the workweek. The regular rate includes hourly wages plus most non-discretionary bonuses and shift differentials, not just the base hourly figure.

For example, an employee earning $20 per hour who works 45 hours in a week earns 40 hours at the regular rate plus 5 hours at $30 per hour. Indeed's overtime calculation guide walks through several worked examples, including employees who split time between two pay rates.

What is the Salary Threshold for Overtime Exemption in 2026?

To qualify as exempt under the federal white-collar exemptions, an employee must earn at least $684 per week, or $35,568 annually, on a salary basis. A 2024 rule that would have raised this threshold was struck down in court, so the 2019-era figure remains the federal standard in 2026.

Salary alone never determines exemption. Employees must also pass a duties test tied to executive, administrative, professional, computer, or outside-sales work. Review what qualifies an employee as exempt before finalizing any offer letter.

• Federal salary threshold: $684 per week ($35,568 per year)
• Highly compensated employee threshold: $107,432 in total annual compensation
• State thresholds: California, New York, Washington, and Colorado all set higher minimums

Because several states raise their thresholds independently of federal law, always apply whichever standard is higher for the employee's work location. SHRM's FLSA overtime resource tracks these federal and state changes as they happen.

How are Exempt and Non-Exempt Employees Different?

Beyond overtime eligibility, exempt and non-exempt status affects time tracking, benefits administration, and how deductions are handled. Reviewing how salary and hourly pay structures differ helps clarify that pay structure and exemption status are related but not identical concepts.

A salaried employee can still be non-exempt and owed overtime if their duties don't meet the test. Treating salary and exemption as interchangeable is one of the most frequent classification errors HR teams make.

What Happens When Employers Get FLSA Overtime Rules Wrong?

Misclassification exposes employers to back wages, liquidated damages equal to the back wages owed, and attorney fees if a claim goes to court. Penalties apply retroactively, often covering up to two or three years of unpaid overtime.

Beyond the financial exposure, chronic overtime and unclear pay practices erode trust. Gallup's research on burnout found that how employees experience their workload predicts burnout more strongly than raw hours worked, which makes fair, transparent overtime practices a retention issue as much as a compliance one.

How Can HR Teams Stay Compliant With FLSA Overtime Rules?

• Audit every job description against the current duties test, not just the job title
• Track hours accurately for all non-exempt employees, including remote and hybrid staff
• Recalculate the regular rate whenever bonuses or shift differentials are added
• Monitor state-level threshold changes in addition to the federal minimum

A documented, repeatable classification process protects your organization far better than reacting after a complaint. Forbes Advisor's HR compliance guide recommends building this review into your annual compliance calendar rather than treating it as a one-time exercise.

HR Cloud's payroll and time-tracking tools help HR teams flag classification risk early, keep accurate overtime records, and apply the correct threshold automatically as regulations shift. Building compliance into your everyday workflow is far less costly than correcting it after the fact.

Discover how our HR solutions streamline onboarding, boost employee engagement, and simplify HR management

Book Your Free Demo

Frequently Asked Questions

Q: What is the FLSA overtime rule in simple terms?

A: It requires covered employers to pay non-exempt employees 1.5 times their regular rate for every hour worked beyond 40 in a workweek.

Q: What is the current federal overtime salary threshold?

A: As of 2026, the federal threshold is $684 per week, or $35,568 annually, for the standard white-collar exemptions.

Q: Can a salaried employee still receive overtime?

A: Yes. A salaried employee who does not meet the duties test for exemption is considered salaried non-exempt and is still entitled to overtime pay.

Q: Do state overtime rules override federal FLSA rules?

A: When a state sets a higher salary threshold or stricter duties test, employers must follow the state standard for employees working in that state.

Q: What counts toward the regular rate used to calculate overtime?

A: The regular rate includes hourly wages plus most non-discretionary bonuses, commissions, and shift differentials, not just the base hourly wage.

Q: How far back can an employee claim unpaid overtime?

A: Claims typically reach back two years, or three years if the violation is found to be willful, plus liquidated damages equal to the unpaid wages.