Fair Labor Standards Act: FAQs

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.

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.

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.

The salary requirement under the FLSA is $684 per week.

The HCE threshold under the FLSA is $107,432. 

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.

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.

Yes, $380 per week is the salary level of exempt employees under the FLSA in American Samoa. 

Yes, $1,043 per week is the “base rate” threshold for exempt employees under the FLSA for employees in the motion picture industry. 

The new rules for overtime pay under the FLSA went into effect on January 1, 2020.

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.

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.

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.

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.

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.