What are the current overtime pay requirements under the Fair Labor Standards Act?
Executive summary
The Fair Labor Standards Act requires most non‑exempt employees to receive overtime pay at a rate of at least one and one‑half times their regular rate for all hours worked over 40 in a fixed seven‑day workweek [1]. Whether a worker is entitled to that overtime depends on exemption tests—primarily the salary threshold and duties tests—where the federal weekly salary test for EAP exemptions remained $684 per week in 2026 while many states impose higher thresholds and different duties standards [2] [3].
1. What the FLSA’s overtime floor actually requires
At the federal baseline, the FLSA mandates that covered, non‑exempt employees be paid time‑and‑a‑half for hours worked over 40 in a workweek, with the overtime amount computed using the employee’s regular rate of pay [1] [4]. The statute and federal regulations set the universality of that overtime obligation while also describing the method for computing it, so employers must monitor hours each fixed seven‑day period and calculate premiums accordingly [1] [4].
2. Who is exempt: salary and duties tests, and the current federal salary floor
Workers who meet the executive, administrative and professional (EAP) exemptions are not automatically entitled to overtime, but to qualify they must satisfy both a duties test and a salary threshold; the federal minimum salary level for those exemptions stayed at $684 per week in 2026 [2]. The Department of Labor attempted to raise and periodically update these thresholds, but courts have intervened—creating legal uncertainty—so the federal salary test remains at the lower level while some proposed DOL rules are in litigation or appeal [5] [6].
3. State and local threads that complicate the headline rule
States and localities increasingly impose higher salary floors or different duties standards that override the federal floor for workers within their borders; examples include California, Colorado, Washington and certain New York counties, where weekly salary thresholds for EAP exemptions in 2026 are substantially above the federal $684 level and some states apply a “more than 50 percent” test rather than the federal “primary duty” standard [2] [7] [3]. That means employers with multistate operations must apply the most protective rule that applies to each worker, often driving classification and payroll adjustments [3].
4. Calculation, recordkeeping and the practical compliance burden
Determining overtime pay begins with establishing the regular rate and applying the time‑and‑one‑half formula, but employers must also maintain accurate records of hours and wages and reconcile state variations that alter exemption eligibility or threshold multipliers; failure to do so risks backpay liabilities and agency enforcement [1] [4]. Recent administrative guidance and firm alerts emphasize employers should map exempt roles to current thresholds and prepare payroll systems for changes [5] [3].
5. New tax reporting and the “no tax on overtime” overlay
A separate development from recent federal legislation permits a temporary federal tax deduction for the overtime premium portion of FLSA‑required overtime (the “half” above the regular rate) for tax years through 2028 and requires employers to begin separating qualified overtime amounts on W‑2s (new Code TT) beginning in tax year 2026, creating additional payroll reporting obligations even as substantive overtime rules remain in flux [8] [9] [10]. Agencies and employers are being advised to implement tracking and reporting changes now to avoid scrambling when W‑2 reporting is finalized [10] [9].
6. Competing interests and where uncertainty remains
Labor advocates press for higher federal salary thresholds and broader overtime coverage, while many employers and business groups warn of cost and administrative burdens if exemptions are raised or standardized upward; courts have already checked some DOL changes, and the legal landscape remains unsettled as agencies, states, employers and unions jockey over which rules should govern [5] [3]. Sources used for this report reflect both DOL rulemaking activity and state‑level updates, but this summary does not attempt to resolve ongoing litigation or to catalogue every state threshold change beyond the cited examples [5] [2] [3].