One of the most pervasive wage violations in America isn’t simply about underpaying workers—it’s mislabeling them entirely. Being paid a salary does not, by itself, mean an employee is exempt from overtime pay under the Fair Labor Standards Act (FLSA). Under the Fair Labor Standards Act (FLSA), employers must pay non-exempt employees 1.5 times their regular rate for all hours worked over 40 in a workweek. But too often, salaried employees are misclassified as “exempt” and denied the overtime pay they’ve earned.
FLSA 101: The Exemption Rules
To be legally exempt from overtime under the FLSA, three tests must generally be met:
- Salary Basis Test
The employee must be paid a fixed salary that is not subject to reduction based on the quality or quantity of work performed. If the employee’s compensation fluctuates, then they are likely not paid a true salary.
- Salary Level Test
As of July 1, 2024, the minimum weekly salary to qualify for most exemptions increased to $844/week (about $43,888 annually). On January 1, 2025, it rose again to $1,128/week (about $58,656 annually). If a salaried employee earns less than this, they are likely entitled to overtime, regardless of their job title or duties.
- Duties Test
The employee must perform certain types of job duties that fit into specific exemption categories:
- Executive: Primary duty is managing the enterprise or department, with authority over other employees.
- Administrative: Performs non-manual work related to business operations or management, with discretion on significant matters.
- Professional: Requires advanced knowledge in a field of science or learning, typically acquired through specialized education.
- Computer Employee: Applies to certain IT professionals, but only if they are highly skilled and well-compensated.
- Outside Sales: Makes sales or obtains orders away from the employer’s place of business.
If any of these tests fail, the employee is non-exempt and must receive overtime.
Common “Salary” Violations Under the FLSA
Employers often assume—or hope—that slapping a “salaried” label on a worker shields them from overtime obligations. But that’s not how the law works. Here are some examples of “salaries” that do not meet the FLSA “Salary” test requirements, potentially entitling the worker to overtime:
- Paying a salary below the FLSA threshold. No matter what your job title and duties are, you must be paid at least $1,128.00 per week to be exempt from overtime.
- Not Paid on a “Salary Basis.” If your salary is based on working a fixed number of hours per week, you may not be paid a true salary.
- Paid on a Day Rate or Shift Rate. Day or shift rates are not salaries unless they are above the weekly threshold, fully guaranteed, and are not reduced for the quality or quantity of your work.
- Commission only pay. Unless a specific exemption applies, generally, commission-only pay does not satisfy the salary test without a fixed weekly salary of at least $1,128.00 per week.
- Deducting from salaried employees. Salary deductions for partial-day absences violate the salary basis test and trigger loss of exempt status.
- Pay that fluctuates based on hours worked. Salary must be fixed and not tied to hours worked.
- Salary plus hourly overtime without an overtime premium. Paying straight time for overtime violated the FLSA.
How to Spot Misclassification
If one of these applies to you:
- “I’m salaried, but I work 50–60 hours a week without overtime.”
- “I manage people—but only occasionally, and I don’t have hiring/firing power.”
- “They call me a manager, but I mostly do frontline customer service.”
- “I make less than $1,128 per week and never get overtime.”
- “When I take a few hours off, my salary is reduced.”
- “My salary is reduced if I don’t meet my production goal.”
- “My salary is reduced if I do not work a minimum number of hours in a week or if I do not work all my assigned shifts.”
If you fall into one of these…it’s time to take a closer look. Job duties and compensation—not job titles—determine exemption.
New Developments: DOL Final Rule Raises the Stakes
Effective July 1, 2024, the U.S. Department of Labor issued a final rule increasing the salary threshold for exemption:
| Date | New Salary Threshold | Highly Compensated Employees |
|---|---|---|
| July 1, 2024 | $844/week ($43,888) | $132,964/year |
| Jan 1, 2025 | $1,128/week ($58,656) | $151,164/year |
Tens of thousands of employees once treated as exempt may now become eligible for overtime. Employers who fail to adjust risk face class actions and significant liability.
Final Thoughts
Employers bank on employees not knowing their rights. But the FLSA is clear: A salary alone doesn’t exempt anyone from overtime. Each salary situation should be reviewed to determine whether an exemption actually applies. Misclassification can lead to years of unpaid overtime, liquidated damages, and attorneys’ fees. Plaintiff-side lawyers have an opportunity to bring relief not just to individuals, but to entire classes of misclassified workers.
Need Help Assessing a Salary-Based Overtime Claim?
We represent misclassified employees nationwide. If you are salaried, overworked, and underpaid, you may be entitled to significant back pay and damages.
