Federal Overtime Law Explained: Updated Rules, Key Facts, and More (2025)

Confused about federal overtime law? This 2025 guide covers updated rules, eligibility, and how to calculate overtime pay accurately.

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Frequently Asked Questions
What is the federal salary threshold for overtime exemption?

The federal salary threshold is $684 per week (or $35,568 per year). Employees must meet this threshold, along with specific job duties, to be classified as exempt from overtime pay under the Fair Labor Standards Act (FLSA).

What happens if I misclassify an employee as exempt?

Misclassifying an employee as exempt can lead to serious consequences. Employers may be required to pay back wages, liquidated damages, and legal fees. The Department of Labor may also impose fines for willful violations. Regular audits of employee classifications can help prevent costly mistakes.

Are bonuses included in calculating overtime pay?

Yes, non-discretionary bonuses (those tied to performance or other criteria outlined in advance) must be included in calculating an employee’s regular rate of pay. This regular rate is then used to determine the overtime pay rate. Discretionary bonuses, like holiday gifts, are generally excluded.

Do small businesses need to follow federal overtime laws?

Yes, small businesses must comply with federal overtime law if they meet FLSA coverage criteria. This includes:

  • Enterprise coverage: Businesses with annual revenue of $500,000 or more.
  • Individual coverage: Employees engaged in interstate commerce, such as processing out-of-state transactions or handling goods that move across state lines.

Even smaller businesses not covered under FLSA may still need to follow state-specific overtime laws.

Can employees refuse overtime?

Yes, employees can refuse to work overtime, but there’s a catch. In at-will employment states, employers can legally terminate an employee for refusing overtime work unless exceptions apply, such as medical restrictions or religious accommodations. 

States like California have specific protections, such as the one-day rest rule, which prohibits employers from requiring employees to work more than six consecutive days in a workweek.

Is overtime over 8 hours a day or 40 hours a week?

Under federal law, overtime is calculated based on 40 hours per workweek, not the number of hours worked in a single day. 

Employees are eligible for 1.5x their regular rate of pay for any hours worked over 40 in a seven-day workweek. However, some states, like California, require overtime pay for hours worked over 8 in a day. Check state-specific laws to ensure compliance.

Is overtime over 8 hours a day or 40 hours a week in California?

In California, overtime pay kicks in for both:

  • Daily overtime: Any hours worked over 8 in a single day.
  • Weekly overtime: Any hours worked over 40 in a workweek.

Additionally, double-time pay applies for hours worked over 12 in a day or 8 hours on the 7th consecutive day in a workweek. California’s rules are stricter than federal overtime laws.

Who is exempt from overtime pay?

Employees are exempt from overtime pay if they meet the following three criteria under the Fair Labor Standards Act (FLSA):

  1. They are paid on a salary basis (not hourly).
  2. They earn at least $684 per week ($35,568 per year).
  3. Their job duties qualify under specific exemptions, such as executive, administrative, or professional roles.

Other exemptions include outside sales employees, certain computer professionals, and highly compensated employees (HCEs) earning at least $107,432 annually.

Is it illegal to not pay time and a half for overtime?

Yes, it is illegal under the FLSA to not pay time and a half for overtime hours worked by non-exempt employees. 

Employers who fail to pay the proper overtime rate can face penalties, including back wages, fines, and legal action. Even if an employer prohibits overtime, they are still required to pay for unauthorized overtime hours worked by the employee.

To avoid non-compliance, employers should track hours accurately and address unauthorized overtime through disciplinary policies, not by withholding pay.

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