Exempt status, minimum wage and overtime

See who is exempt from minimum wage and overtime and what non-exempt employees are owed, and set overtime eligibility in Every

Under the federal FLSA, most employees must be paid at least the minimum wage for all hours worked and overtime for hours over 40 in a workweek. An employee is exempt from both only when their job duties and salary meet all the requirements of the Department of Labor’s regulations.

This page explains general rules, not legal or tax advice for your company. Rules change, and they depend on where your company is registered and where your people work. Before you act, check with your own lawyer, accountant or tax advisor.

Who is exempt

The FLSA exempts bona fide executive, administrative, professional and outside sales employees, and certain computer employees, from both minimum wage and overtime. Job titles don’t decide it: the employee’s own duties and salary do. The Department of Labor’s Fact Sheet #17A sets out each test.

An executive, administrative or professional employee meets all three of these tests:

• Salary basis: they regularly get a predetermined amount each pay period, weekly or less often, that isn’t reduced because of the quality or quantity of their work. Apart from the exceptions in the Department of Labor’s Fact Sheet #17G, they get the full salary for any week in which they do any work.
• Salary level: the salary is at least the standard salary level, which the Department of Labor publishes on its earnings thresholds page. Nondiscretionary bonuses and commissions paid at least yearly can make up to 10% of it.
• Duties: their primary duty, the main or most important one they perform, meets one of the duties tests below.

An exempt computer employee can instead be paid by the hour, at no less than the hourly rate on the same page. Administrative and professional employees can instead be paid on a fee basis: an agreed sum for a single job. The salary tests don’t apply to outside sales employees, teachers or employees practicing law or medicine.

Exemption	The employee’s primary duty
Executive	Managing the business or a recognized department of it, while directing the work of 2 or more full-time employees or the equivalent, and either having the authority to hire or fire, or making recommendations that carry particular weight on hiring, firing, promotion or other changes of status
Administrative	Office or non-manual work directly related to the management or general business operations of the employer or its customers, using discretion and independent judgment on matters of significance
Learned professional	Work requiring advanced knowledge in a field of science or learning, customarily acquired through a prolonged course of specialized intellectual instruction
Creative professional	Work requiring invention, imagination, originality or talent in a recognized field of artistic or creative endeavor
Computer	Systems analysis, or designing, developing, testing or modifying computer systems or programs, as a systems analyst, programmer, software engineer or similarly skilled worker
Outside sales	Making sales or obtaining orders or contracts, while customarily and regularly working away from the employer’s place of business

The exemptions don’t cover manual laborers or other blue-collar workers, however highly they’re paid.

Highly compensated employees

A highly compensated employee is one whose total annual compensation meets the level on the Department of Labor’s earnings thresholds page. That total must include a weekly salary of at least the standard salary level, paid on a salary or fee basis.

They’re exempt when their primary duty includes office or non-manual work. They must also customarily and regularly perform at least one exempt duty of an executive, administrative or professional employee.

Business owners

Under a special federal rule, an employee who owns at least a bona fide 20% equity interest in the business and is actively engaged in managing it counts as an exempt executive. The salary tests don’t apply to them.

What non-exempt employees are owed

A non-exempt employee is owed at least the minimum wage for all hours worked. For hours over 40 in a workweek, they’re owed overtime at no less than time and a half their regular rate of pay.

A workweek is a fixed, regularly recurring period of 168 hours, or seven consecutive 24-hour periods. It can start on any day and at any hour, and hours can’t be averaged over 2 or more weeks. Employers must normally pay overtime earned in a workweek on the regular payday for the pay period in which it was earned.

A salary doesn’t change this: a fixed salary for a regular workweek longer than 40 hours doesn’t meet the FLSA’s requirements. An employer and employee can’t agree to waive overtime.

For each non-exempt employee, employers keep records that include the hours worked each day and in each workweek. They may use any timekeeping method, including having employees write down their own times, as long as it’s complete and accurate.

State and city law

The FLSA sets a minimum. Employers also follow any state law or city ordinance that sets a higher minimum wage or a shorter maximum workweek.

The Department of Labor’s State Minimum Wage Laws page leaves out local rates and says to check with the state’s labor office for official information. Its State Labor Offices page lists each one.

California

California sets its own overtime and exemption rules, which the California Labor Commissioner explains. A non-exempt employee in California is paid:

• Time and a half their regular rate for hours over 8 and up to 12 in a workday, hours over 40 in a workweek, and the first 8 hours on the seventh consecutive day of work in a workweek
• Double their regular rate for hours over 12 in a workday, and hours over 8 on the seventh consecutive day

In California, a salaried employee is paid overtime unless they meet the test for exempt status under federal and state law, or a California law or wage order exempts them.

For an executive, administrative or professional exemption in California, the employee:

• Spends more than half their worktime on exempt duties
• Customarily and regularly uses discretion and independent judgment in those duties
• Earns a monthly salary of at least twice the state minimum wage for full-time work, which is 40 hours a week

The California Labor Commissioner publishes the current state minimum wage. Several California cities set a higher minimum wage for employees working within the city, and employees are paid the local rate where it’s higher. In San Francisco, for example, the city’s minimum wage applies to employees performing work in the city, including part-time and temporary employees, as its Office of Labor Standards Enforcement explains.

In Every

Every records whether each employee is Eligible for overtime. Company Admins and HR Admins set it when they add the person and can change it on the person’s profile.

When you add someone

On People, select Add people. If a menu opens, select Create new hire. In the Job & compensation step, Eligible for overtime offers Yes eligible for OT and No. Contractors aren’t asked.

For hourly pay, Timesheet input frequency sets whether the person tracks hours every day, once per pay period or not at all. See Add people.

On the person’s profile

On People, select the person, then Job & pay. Under Employment details, Eligible for overtime shows Yes, No or “No overtime policy set”. Company Admins and HR Admins can change it with Edit information (see All People).

Each employee sees their own on My profile → Job & pay (see Overtime and exempt status).

In a pay run

People who track hours submit timesheets, which Company Admins and HR Admins review on Time → Timesheets (see Timesheets).

In a pay run on Payroll → All pay runs, an hourly person’s pay details list each job’s Hours, Overtime 1.5x and Overtime 2x. Every pays Overtime 1.5x hours at 1.5 times the job’s pay rate and Overtime 2x hours at twice it. Both overtime fields are unavailable for an employee whose Eligible for overtime is No, and for contractors.

For salaried employees who aren’t eligible for overtime, Salary overtime exempt in the run’s Payroll settings chooses whether you enter Hours or an Amount. See Run payroll.