As employment law continues to evolve, understanding the intricacies of labor laws for salaried employees is more important than ever in 2025. This guide is an authoritative resource designed for HR professionals, CEOs, small business owners, and those in finance and people roles in US-based businesses.
As companies continue to adapt to new work environments, including remote hiring and multi-state operations, staying abreast of these laws is a legal imperative and a strategic advantage.
Whether it’s grappling with the nuances of the Fair Labor Standards Act (FLSA) or deciphering state-specific regulations, this guide aims to make sense of the complexities and ensure your business remains compliant and informed.
What Are the Basics of Labor Laws?
A salaried employee is typically defined as a worker who is paid a fixed salary basis, regardless of the number of hours worked during the workweek. This contrasts with hourly employees, who are compensated based on the hourly wage for hours of work.
Salaried employees are often expected to fulfill their job duties irrespective of the exact number of hours they take, whether that’s a full day or a partial day.
A Look at Federal Labor Laws
Central to understanding the employment law for salaried workers is the Fair Labor Standards Act. This federal law sets the baseline for the following:
- Overtime pay
- Minimum wage
- Youth employment standards
- Recordkeeping
These affect employees in the private sector and local, state, and federal governments. Under the FLSA, exempt employees, often salaried, are not eligible for overtime pay. However, non-exempt employees must be paid overtime at a rate of at least one and one-half times their regular rate of pay for hours worked beyond a standard 40-hour workweek.
The classification of exempt and non-exempt employees hinges on factors like salary level, salary basis, and job duties. The duties test, for instance, is used to determine if an employee’s job duties qualify them for exempt status.
It’s important to note that simply holding a job title such as “manager” or “administrator” does not automatically qualify an employee as exempt.
The FLSA also addresses issues such as absences, disciplinary suspensions, and sick leave, providing protections to ensure fair treatment of workers.
Moreover, the Department of Labor (DOL) and the U.S. Department of Labor play pivotal roles in enforcing these federal labor laws. They issue regulations (found in the Code of Federal Regulations, or CFR) and fact sheets that guide employers in classifying employees correctly and complying with wage and hour laws.
How Does Overtime for Salaried Employees Work?
Overtime pay, a critical component of the FLSA, is often misunderstood when it comes to salaried employees. Contrary to common belief, being salaried does not inherently exempt an employee from overtime.
According to FLSA, overtime pay is required for non-exempt workers at one and one-half times their regular pay rate for hours worked beyond the standard 40-hour workweek.
Federal Guidelines on Overtime
The Department of Labor outlines specific criteria to determine if salaried employees are exempt or non-exempt from overtime pay. This includes the salary basis test and duties test.
Exempt employees, often in executive, professional, or administrative roles, must meet certain job duties requirements and be paid on a salary basis at not less than a specified minimum salary.
As of 2024, this threshold stands at $684 per week ($35,568 annually). However, this amount can vary based on state labor laws.
Common Misconceptions
A prevalent misconception is that all salaried employees are automatically exempt from overtime, regardless of their job duties or salary. Understanding that exemption depends on more than being salaried is essential.
Factors like the nature of job duties, number of hours worked, and employee’s salary level play a significant role. Employers must be diligent in classifying employees correctly to avoid violations of the FLSA.
What Federal Laws for Salaried Employees Are Changing in 2025?
The U.S. Department of Labor (DOL) announced a new rule effective July 2025 that revises the salary threshold for exempt employees under the Fair Labor Standards Act (FLSA). This update increases the minimum salary requirements for white-collar exemptions, including executive, administrative, and professional employees.
What Are the Key Changes?
Changes are meant to reflect inflation and increased living costs. As a result, thresholds tend to move upward rather than downward:
- Minimum Salary Threshold: The new rule raises the standard salary level from $35,568 per year ($684 per week) to $58,656 annually ($1,128 per week).
- Highly Compensated Employee Exemption: The total annual compensation threshold for highly compensated employees (HCEs) increased from $107,432 (January 2024) to $151,164 (January 2025).
- Automatic Increases: To ensure that salary thresholds remain current, automatic increases will occur every three years based on inflation data.
The effective date for this update provides employers time to adjust compensation structures and reclassify workers as necessary. If you’re not already working on updates to reflect the new rules, it’s best to start as soon as possible.
Are There Potential Legal Challenges?
Some employers have raised concerns about the rule’s economic impact, leading to potential legal challenges. In the past, federal court rulings, including decisions from the Eastern District of Texas, have changed how increases are implemented.
Some organizations, particularly smaller ones, often struggle to adapt to salary thresholds without disrupting their operations. But as of now, organizations should expect to comply with the changes as they’re currently written.
If you believe your organization is eligible for an exemption, consult a legal expert with experience serving businesses in your industry or locality.
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What Are the Definitions of Salaried and Hourly Employees in 2025?
The DOL’s final rule further clarifies the difference between salaried and hourly employees. Understanding this distinction is essential for employers and employees to determine eligibility for overtime pay, benefits, and other employment protections.
The definitions for these types of employees have not changed. Rather, the rules have been revisited to clarify overtime requirements and eligibility thresholds.
Overtime for Salaried Employees
Employers should be familiar with the definitions of exempt status and bona fide job duties for salaried employees:
- Exempt Status: Overtime exemptions typically apply to salaried employees if their job duties meet the criteria outlined in the duties test.
- Bona Fide Job Duties: The duties test considers whether the employee’s primary responsibilities involve executive, administrative, or professional tasks. Managers, accountants, legal professionals, and IT specialists often qualify as exempt employees.
Keep in mind that the definition of job duties comes from the federal government, not from your internal classification system. You may call someone an administrative worker internally, but if their duties aren’t in line with the federal definition of administrative workers, they may not be exempt from overtime. It’s best to double-check.
Overtime and Wages for Hourly Employees
Many hourly employees are eligible for overtime. There are overtime-exempt and nonexempt employees, and employers are responsible for ensuring fair and legal compensation and accurate time tracking.
- Nonexempt: These employees are eligible for overtime pay for hours worked beyond 40 in a workweek.
- Minimum Wage Compliance: Employers must pay at least the federal minimum wage unless state law sets a higher rate.
- Time Tracking: Employers must accurately track and compensate employees for all hours worked.
Understanding these guidelines helps employers implement compliant payroll practices while ensuring their employees receive the compensation they’re entitled to. Always cross-reference state requirements with federal ones — federal law sets minimums, but state requirements may exceed them.
What Should You Know About Federal Labor Laws for Salaried Employees?
Federal labor laws, particularly the FLSA, are pivotal in defining the rights and obligations of salaried employees in the United States. These laws regulate the aforementioned components with specific provisions for both exempt and non-exempt employees. The FLSA sets a national minimum standard, with states allowed to implement more stringent regulations.
The Department of Labor’s Role
The U.S. Department of Labor plays an essential role in enforcing federal labor laws. It provides guidelines through fact sheets and the CFR to help employers understand and comply with FLSA requirements.
The DOL also oversees the enforcement of these laws, ensuring that employees’ rights are protected, especially in matters of salary basis, minimum wage, and overtime pay.
Impact of Proposed FLSA Changes
The proposed changes to the FLSA-exempt salary threshold are a significant development in federal labor laws. The DOL has proposed raising the minimum salary required for exemption from overtime.
This increase, if implemented, will shift the landscape of exempt status, potentially reclassifying many currently exempt salaried workers to non-exempt status, thereby affecting their eligibility for overtime pay.
Employers will need to closely monitor these changes to ensure compliance and adjust their payroll and human resource practices accordingly.
What Does It Mean To Be a Salaried Non-Exempt Employee?
Salaried non-exempt employees are those who receive a fixed salary but are still eligible for overtime pay under the FLSA. Unlike exempt employees, their exempt status does not depend solely on their salary level or job title but also on the nature of their job duties and the number of hours they work.
Impact on Overtime and Labor Laws
For salaried non-exempt employees, overtime pay must be calculated based on their regular rate of pay for any hours worked over 40 in a workweek.
This classification can sometimes lead to confusion, as it breaks the typical association of salaried employees with exempt status. Employers must track the hours of work of these employees accurately and pay overtime as required.
Criteria for Classification
To classify an employee as salaried non-exempt, employers must consider several factors:
Salary Basis: The employee must be paid a predetermined salary, not impacted by variations in the quality or quantity of work.
Duties Test: The nature of the employee’s job duties must not meet the criteria for exempt status under the FLSA. This includes a detailed evaluation of their primary duty, level of discretion and independent judgment, and the nature of professional, administrative, or executive tasks performed.
Salary Level: Even if paid a salary, if the employee’s earnings fall below the minimum threshold set by the FLSA or state laws, they cannot be classified as exempt.
Employers should regularly review employees’ exempt or non-exempt status to ensure compliance with evolving federal and state labor laws. Understanding the distinction between exempt and non-exempt salaried employees is important for accurately applying labor laws and avoiding costly legal and financial repercussions.
What Are Some Compliance Strategies for 2025?
Compliance strategies have remained relatively unchanged from 2024 to 2025. While the majority of federal updates relate to overtime thresholds, reviewing your overall compliance strategy is never a bad idea.
Review Job Descriptions
Ensure job duties align with exemption criteria. Remember that your internal titles aren’t what’s used to determine exemptions. Exemptions and classifications come from the scope of work, even if you don’t use a title that matches those used by employment law.
Adjust Compensation Plans
Increase salaries or reclassify employees as needed. Review your current overtime policies and consider whether your organization would benefit from new hires to divide the workload or overtime for your existing employees.
Different organizations have different needs. If your organization frequently requires overtime to complete projects or meet deadlines, it may be worth hiring more employees. If overtime isn’t common, it’s best to support your current workforce.
Track Work Hours
Implement accurate time-tracking systems for nonexempt employees. Mix-ups or miscommunications can prevent employees entitled to overtime from receiving the compensation they’re owed.
Non-compliance can result in significant penalties. Review your time tracking system to be sure that every minute is accounted for.
Stay Informed
Monitor legal updates and court rulings affecting overtime rules. Consider your state’s unique rules for minimum wage, retirement plans, health insurance, and leave time.
States introduce new rules every year, so it’s best to stay ahead of compliance requirements and be ready to go when rules go into effect.
Seek Legal Advice
Consulting legal professionals who work with organizations in your area can provide peace of mind. Additionally, employers should prepare for possible legal challenges and ensure that their payroll practices comply with updated FLSA regulations.
Choose Mosey for Your Business Compliance Strategy
In the dynamic regulatory environment, it’s imperative for businesses, especially those with salaried employees, to stay ahead of the curve in labor law compliance. Some best practices include conducting regular audits of employment practices, staying current on state and federal law changes, and training HR and management teams on compliance requirements.
These steps are vital to avoid legal pitfalls and foster a fair and transparent workplace culture.
Mosey emerges as an invaluable tool in this landscape, offering a comprehensive solution for managing and streamlining your business’s compliance strategy. With its state-of-the-art features, Mosey simplifies multi-state and local compliance complexities, offering a centralized platform for tracking and managing labor law obligations.
From automating notifications about regulatory changes to providing a clear overview of your compliance status, Mosey empowers businesses to focus on growth while ensuring legal adherence.
Book a demo today to learn more and take the first step toward your business’s more streamlined, informed, and compliant future.
