Under the Fair Labor Standards Act, non-exempt employees must be paid at least 1.5 times their regular rate for every hour over 40 in a workweek. Exempt employees are not entitled to overtime. Most workers are non-exempt.
The three tests for exemption
- Salary basis: paid a fixed salary that doesn't drop with the quality or quantity of work.
- Salary level: at least $684 a week ($35,568 a year) under the federal rule. The Department of Labor's 2024 increase was struck down by a federal court, so the $684 level applies.
- Duties: the job's primary duty must be executive, administrative, professional, computer or outside sales work as defined by regulation.
Job titles don't decide exemption. A "manager" who spends most of the day running a register is likely non-exempt.
States with higher thresholds
Several states set salary thresholds above the federal level, often tied to the minimum wage, including California, Colorado, New York, Washington, Maine and Alaska. An employee must meet the higher of the federal and state tests.
Daily overtime
California requires overtime after 8 hours in a day and double time after 12. Alaska, Nevada and Colorado also have daily overtime rules in some situations. Each state labor law page notes them.
The federal overtime deduction
For 2025 through 2028, eligible workers can deduct qualified overtime premium pay on their federal return, up to a limit, under the 2025 tax law. It doesn't change how overtime is paid, only how it is taxed at filing time.