Below are questions frequently asked about the Fair Labor Standards Act (FLSA) in the US.
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What is the Fair Labor Standards Act (FLSA)?
The Fair Labor Standards Act (FLSA) regulates minimum wage, overtime pay, recordkeeping and youth employment standards for employees in the private sector and in federal, state and local governments.
How is “overtime” defined in the Fair Labor Standards Act (FLSA)?
Employees covered by the FLSA (“non-exempt employees”) are entitled to receive pay for all billable hours that exceed 40 hours in a typical workweek. The hourly rate must be equal to or greater than one and one-half their regular pay rate, which is referred to as “overtime” pay.
How are exempt employees defined in the Fair Labor Standards Act (FLSA)?
Employees who are exempt from overtime must:
1. have a salary where they are paid a predetermined and fixed salary which is not affected or reduced by any changes in the quality or quantity of work performed (the “salary basis test”);
2. be paid a minimum weekly salary, which is $684 per week (the equivalent of $35,568 annually for a full-time worker) (the “salary level test”); and
3. primarily perform executive, administrative, or professional duties, as defined in the Department’s regulations (the “duties test”).
There are categories of employees who are not subject to either the salary basis or salary level tests (for example, doctors and lawyers). Also exempted are certain highly compensated employees (HCEs) who earn above a higher level of total annual compensation ($107,432) and satisfy a minimal duties test under the Department’s regulations.
What is the salary requirement under the FLSA?
The salary requirement under the FLSA is $684 per week.
What is the Highly Compensated Employee (HCE) threshold under the FLSA?
The HCE threshold under the FLSA is $107,432.
How much of the salary of a Highly Compensated Employee (HCE) under the FLSA can be paid as a nondiscretionary bonus or incentive payment?
10% of the annual salary of a Highly Compensated Employee (HCE) can be paid as a nondiscretionary bonus or incentive payment and still count toward the threshold for an employee to be considered a Highly Compensated Employee.
Is the salary level of exempt employees under the FLSA different in Puerto Rico, the U.S. Virgin Islands, Guam, and the Commonwealth of the Northern Mariana Islands?
Yes, $455 per week is the salary level of exempt employees under the FLSA in Puerto Rico, the U.S. Virgin Islands, Guam, and the Commonwealth of the Northern Mariana Islands.
Is the salary level of exempt employees under the FLSA different in American Samoa?
Yes, $380 per week is the salary level of exempt employees under the FLSA in American Samoa.
Is the “base rate” threshold for exempt employees under the FLSA different for employees in the motion picture industry?
Yes, $1,043 per week is the “base rate” threshold for exempt employees under the FLSA for employees in the motion picture industry.
When did the new rules for overtime pay under the FLSA go into effect?
The new rules for overtime pay under the FLSA went into effect on January 1, 2020.
Who is covered by the FLSA?
Minimum wage, overtime pay, recordkeeping, and youth employment standards covering employees in the private sector and in Federal, State, and local governments are all under the FLSA.
Does the Fair Labor Standards Act (“FLSA”) apply when a State has its own overtime laws?
The FLSA provides minimum wage and hour standards across the U.S., which does not prevent a state from establishing its own protective standards. In the case where a State establishes a more protective standard than the provisions of the FLSA, the higher standard applies in that State.
What are the salary and compensation levels for exempt employees and Highly Compensated Employees (HCEs)?
The “standard” salary level for exempt employees is $684 per week, or $35,568 annually for a full-year worker. The total annual compensation threshold for highly compensated employees is $107,432 per year.
Are bonuses counted toward the standard salary level test under the Fair Labor Standards Act (“FLSA”)?
Yes. The Department of Labor permits employers to use nondiscretionary bonuses and incentive payments (including commissions) to satisfy up to 10 percent of the standard salary test requirement for exempt employees under the FLSA. For example, such bonuses may include nondiscretionary incentive bonuses tied to productivity or profitability (such as a bonus based on the specified percentage of the profits generated by a business in the prior year). Since some businesses pay significantly larger bonuses, the Department of Labor has capped the amount attributable toward the standard salary level at 10 percent of the required salary amount.
In order for an employer to credit nondiscretionary bonuses and incentive payments (including commissions) toward a portion of the standard salary level test, the payments must be paid at least annually.
Are employers allowed to make a catch-up payment to a borderline exempt employee in the event that an employee doesn’t receive enough in nondiscretionary bonuses and incentive payments (including commissions) in a given year to remain exempt from the FLSA?
Yes. The Department of Labor allows a catch-up payment at the end of the year should an employee not earn enough in nondiscretionary bonuses and incentive payments (including commissions) in that same 52-week period to retain his or her exempt status. The employer has one pay period to make up for the shortfall which may not be more than 10 percent of the standard salary level for the preceding 52-week period. Any such catch-up payment will count only toward the prior 52-week period’s salary amount and not toward the salary amount in the current 52-week period. Catch-up payments are not mandatory. If the employer does not elect to make a catch-up payment, or is untimely, the employee is entitled to overtime pay for any overtime hours worked during the previous 52-week period.
Further Resources
For an overview of the Fair Labor Standards Act, see our article What is the Fair Labor Standards Act?
To understand the difference between Exempt and Non-exempt Employees, see our article Exempt vs Non-exempt Employees.
For the definition of Highly Compensated Employees under the FLSA, see our article Highly Compensated Employees.
For a discussion of expanded access to bonuses and other incentive-based pay for Non-exempt Employees, see our article Bonuses for Non-exempt Employees.
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Legal Information
Finally, a note on how you can use this article. This article is not to be considered legal advice and is not a substitute for advice from qualified legal counsel. The information we provide is not tailored to your individual circumstances, and you may not rely on it. Material aspects of the discussions in this article may change at any time and without further notice.