Employers sometimes make classification errors when hiring their workers. For several decades, it has become common practice for businesses to classify workers as independent contractors but treat them like employees. This arrangement allows the company to avoid several key legal obligations and financial responsibilities.
In some cases, the company didn’t misclassify an employee as an independent contractor. Instead, the error may come from the company claiming that the worker is exempt from overtime pay regulations. The law acknowledges that some workers have a right to overtime wages, but not every worker has that right.
Typically, hourly workers have a right to request overtime pay if they put in more than 40 hours per week. Many people assume that workers paid on a salary basis are exempt. While that is true in many cases, it is not universally true. When is a salaried employee not exempt from overtime wage rules?
Low salaries may not end overtime obligations
The reason that salaried employees are exempt from overtime pay is that typically they have better wages and enhanced job security when compared with hourly workers. Companies make longer-term commitments to salaried workers and provide them with certain benefits.
Hourly workers, on the other hand, often have vastly different wages from one week to the next based on the number of hours they work. Salaried workers received the same pay even when they might only work 30 hours per week or need to put in an overtime shift on a Saturday.
Not every salaried employee is actually exempt from overtime pay. As of January 1, 2025, the state minimum wage increased to $16.50 per hour. That change also has implications for overtime exemptions.
Generally speaking, professionals paid on a salary basis should earn at least twice what full-time workers earning minimum wage earn to be exempt from overtime pay rules. That means that a salary has to be $68,640 or more for an employee to be exempt.
Workers who receive lower salaries, such as assistant managers helping to run retail shops, may not actually be exempt from overtime pay requirements. They could be eligible for overtime pay if they work more than 40 hours, put in exceptionally long shifts or do not receive a day off during the week.
Workers who are familiar with overtime pay regulations can identify when their employers may have failed to provide them with the compensation that they have earned. Pursuing an overtime wage claim can help professionals with low salaries secure the compensation they deserve for the time they have already worked.