Understanding the Fair Labor Standards Act for Salaried Employees

by | Published on Oct 24, 2023 | Human Resources

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Are you a salaried employee or an employer of salaried employees? Understanding the Fair Labor Standards Act (FLSA) is crucial to ensure compliance and avoid potential legal issues. In this blog post, we will unravel the complexities of FLSA regulations and their impact on salaried employees, providing valuable insights to help you navigate the critical aspect of employment law, known as the “fair labor standards act for salaried employees.”

Key Takeaways

  • The Fair Labor Standards Act (FLSA) establishes standards for minimum wage, overtime pay, recordkeeping and child labor protections for salaried employees.
  • Employers must understand salary basis tests and duties tests to accurately classify salaried employees as exempt or non-exempt in order to comply with FLSA regulations.
  • Special considerations should be taken into account when adhering to specific exemptions applicable to certain industries and roles under the FLSA.
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FLSA Overview for Salaried Employees

The Fair Labor Standards Act (FLSA) is a federal law that:

  • Sets standards for minimum wage
  • Regulates overtime pay
  • Establishes recordkeeping requirements
  • Provides protections for child labor

The FLSA applies to both exempt and non-exempt salaried employees, greatly influencing their eligibility for overtime pay and other protections.

Exempt employees do not qualify for overtime pay, but non-exempt employees do. The FLSA overtime rule mandates that non-exempt employees receive 1.5 times their regular rate for hours worked beyond 40 in a work period. This is as per the minimum wage laws.

FLSA Regulations and Salaried Employees

Salaried employees need to comply with the Fair Labor Standards Act (FLSA). This includes being paid at least the federal minimum wage for all hours worked, and for any hours exceeding 40 in a week, they must be compensated with overtime pay at time and a half. To be exempt from certain FLSA provisions, salaried employees must fulfill precise salary requirements, such as being paid at least $23,600 per annum ($455 per week).

The Fair Labor Standards Act (FLSA) provides certain protections for non-exempt salaried employees, including:

  • Minimum wage
  • Overtime pay
  • Recordkeeping
  • Child labor standards

On the other hand, exempt employees are usually exempt from FLSA regulations governing minimum wage and overtime pay, as they perform exempt job duties and meet specific salary thresholds. In contrast, nonexempt employees are subject to these regulations.

Exempt vs. Non-Exempt Salaried Employees

Non-exempt employees are entitled to certain safeguards under the FLSA, such as minimum wage and overtime regulations, whereas exempt employees are not eligible for overtime pay. Employees must fulfill three requirements to be considered exempt under FLSA:

  1. Salary Level: The employee must be paid at least $23,600 per year ($455 per week).
  2. Salary Basis: The employee must be paid on a salary basis, meaning they receive the same salary regardless of the number of hours worked.
  3. Job Duties: The employee must perform exempt job duties as defined by the FLSA.

The Fair Labor Standards Act (FLSA) stipulates overtime provisions that non-exempt employees must be remunerated with paid overtime for hours worked in excess of 40 in a workweek at a rate not less than time and one-half their regular rates of pay. Exempt employees, however, are not entitled to overtime pay, as they meet specific exemption criteria, such as performing executive, administrative, or professional job duties.

Determining Exempt Status for Salaried Employees

FLSA For Salaried Employees

Exempt status for salaried employees is determined through the salary basis test and duties test, ensuring they meet specific criteria to be exempt from overtime pay. The salary basis test requires employees to be paid at least $684 per week on a salary basis, without reductions based on work quality or quantity. The duties test evaluates the job responsibilities of employees to determine if they qualify for exempt status based on their specific job duties.

When employers comprehend and apply the salary basis test and duties test, they can correctly classify their salaried employees as exempt or non-exempt. This ensures they meet FLSA regulations to avoid potential legal issues.

Salary Basis Test

The salary basis test necessitates that employees be remunerated no less than $684 per week on a salary basis, with no deductions due to work quality or quantity. This means that an employee regularly acquires a pre-determined amount of remuneration each pay period on a weekly, or less frequent, basis. The pre-determined amount cannot be decreased due to disparities in the quality or quantity of the employee’s work.

If an employer deducts from an employee’s predetermined salary, it can be concluded that the employee is not being paid on a “salary basis”. Employers may use nondiscretionary bonuses and incentive payments, including commissions, to fulfill up to 10 percent of the standard salary level. These payments can be made on an annual basis or more frequently.

Duties Test

The duties test is utilized to assess the job responsibilities of employees in order to ascertain if they are eligible for exempt status based on their particular job duties. The FLSA considers the following categories of duties required to be fulfilled for an employee to be classified as exempt:

  • Executive
  • Professional
  • Administrative
  • Computer professional
  • Outside sales

The duties test is vital in distinguishing between exempt and non-exempt salaried employees. By examining job responsibilities and verifying their alignment with FLSA exemption criteria, employers can classify their employees accurately, thus adhering to federal regulations.

FLSA Compliance for Salaried Employees

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FLSA compliance for salaried employees necessitates the maintenance of accurate records of work hours and the provision of overtime pay for non-exempt employees when applicable. By adhering to FLSA regulations, employers can avoid fines, back wages, and potential legal action by employees, ensuring a fair work environment and safeguarding their business interests.

Recordkeeping Requirements

Employers must maintain accurate records of employee work hours, including start and stop times, to ensure adherence to the Fair Labor Standards Act regulations. These records should encompass payroll records, including hours worked, wages paid, and deductions made. There is no mandated form for these records, so long as the pertinent information is documented and preserved for a minimum of three years.

Keeping detailed records in line with FLSA recordkeeping requirements allows employers to show compliance with federal regulations, safeguard against potential legal disputes, and guarantee their employees receive due wages and benefits.

Overtime Pay for Non-Exempt Salaried Employees

Non-exempt salaried employees are entitled to overtime pay at a rate of one and a half times their regular pay for hours worked over forty in a workweek. The overtime pay rate is determined using the fluctuating workweek method, which involves calculating the average hourly rate based on the employee’s fixed salary and any non-excludable payments. It is to be noted that the 1.5 overtime rate does not apply to weekends and holidays for non-exempt salaried employees unless they work overtime on those days.

Providing non-exempt salaried employees with overtime pay when due is a key aspect of FLSA compliance. Accurate monitoring of work hours and calculation of overtime pay are crucial for employers to avoid possible legal disputes and maintain fairness in the work environment.

Common FLSA Misconceptions and Mistakes


Common FLSA misconceptions and mistakes include misclassifying employees as exempt or non-exempt and making improper deductions from employee salaries. Recognizing and avoiding these pitfalls helps employers maintain FLSA compliance and foster a positive work environment.

Misclassification of Employees

Misclassification of employees is the failure to accurately differentiate between exempt and non-exempt employees. This can result in legal issues and financial penalties, as well as a decline in employee morale and resentment. To avoid misclassification, employers must carefully analyze the job duties and salary levels of their employees, ensuring that they meet the specific criteria for exempt or non-exempt status under FLSA regulations.

A study commissioned by the US Department of Labor revealed that up to 30% of firms misclassify their employees. Understanding the difference between exempt and non-exempt employees, and correctly classifying their workforce, allows employers to meet FLSA regulations and offer their employees their lawful protections and benefits.

Improper Deductions from Salary

Employers must avoid making improper deductions from exempt employee salaries, as this can result in the loss of exempt status and potential legal consequences. Some examples of improper deductions from employee salaries under FLSA rules include:

  • Deductions for disciplinary suspensions
  • Deductions for uniforms and facilities without written authorization
  • Deductions that reduce the pay of exempt employees on a salary basis
  • Deductions for absences prior to qualifying for paid sick leave

The Safe Harbor provision is a policy that permits employers to avert forfeiture of the exemption for any employees if they:

  • Have a distinctly articulated policy forbidding improper deductions
  • Remunerate employees for any improper deductions
  • Make a sincere pledge to abide by in the future

Adhering to this provision and steering clear of unlawful deductions helps employers stay FLSA compliant and protect their employees’ exempt status.

Special Considerations for Specific Industries and Roles

FLSA Audit Salaried Employees

Particular industries and roles necessitate the consideration of industry-specific exemptions and rules for highly compensated employees. Understanding these special considerations can help employers and employees navigate the complexities of FLSA regulations and ensure compliance within their unique work environments.

Industry-Specific Exemptions

Certain industries, such as agriculture, movie theaters, and railroads, may be exempt from the overtime pay requirements prescribed by the Fair Labor Standards Act. For example, employees employed in agriculture are exempt from the overtime requirements of the FLSA, but they must still receive the federal minimum wage, unless they are exempt from minimum wage requirements.

It is crucial for employers operating in these industries to be aware of the specific exemptions that apply to their workforce, as well as understanding general business operations. Complying with industry-specific exemptions enables employers to meet FLSA regulations and offer their employees the suitable protections and benefits.

Highly Compensated Employees

Highly compensated employees, earning an annual salary of at least $107,432, may be exempt from overtime pay provided they meet certain criteria, even if they do not pass the standard duties test. To be exempt from overtime pay under the FLSA, highly compensated employees must:

  • Receive a minimum base compensation of at least $684 per week paid on a salary or fee basis
  • Generally meet certain tests regarding their job duties
  • Be paid on a salary basis

Employers need to closely evaluate the criteria for highly compensated employees for accurate classification and FLSA compliance. Recognizing the distinct rules for these employees helps employers prevent potential legal disputes and offer their workforce the correct protections and benefits.


In conclusion, understanding the Fair Labor Standards Act and its application to salaried employees is essential for both employers and employees. By ensuring compliance with FLSA regulations, maintaining accurate records, and accurately classifying employees as exempt or non-exempt, employers can create a fair work environment that fosters employee satisfaction and helps avoid potential legal issues. Stay informed, stay compliant, and foster a thriving workplace for all.

Frequently Asked Questions

What are the laws around salary employees?

Salary-based employees generally may only have their pay deducted in certain circumstances and cannot be reduced due to the quality or quantity of work. If an employee works more than 40 hours, they are not entitled to overtime pay, but if they work less than 40 hours, their pay cannot be reduced.

Are salaried employees immune to FLSA?

No, salaried employees are not immune from the FLSA. They receive fewer protections than their non-exempt counterparts and may be required to make up for time off or comply with mandatory overtime without additional compensation.

What is the salary basis rule for FLSA?

Under the FLSA salary basis rule, employers are not obligated to pay exempt employees if they do not perform work for a given week. The minimum salary is set at $684/week or $35,568/year, however certain states may have higher thresholds.

What is the most hours a salaried employee can work?

Salaried employees can legally work beyond 40 hours per week without being entitled to overtime pay. Depending on their responsibilities, some salaried employees may work more than 40 hours a week.

What is the difference between exempt and non-exempt salaried employees?

Exempt salaried employees are not entitled to overtime pay, while non-exempt employees are eligible to receive additional wages for hours worked over the standard 40.