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Do You Qualify For Overtime Or Are You Breaking The Law As An Employer?

Adapted from a real OPS Staffing article originally posted by Mitchell Riley (Aug 2016).

Do You Qualify For Overtime Or Are You Breaking The Law As An Employer?

2026 rewrite. Our original 2016 post on this topic described a federal overtime rule that a court blocked before it ever took effect. The law below is the law as it stands today.

Here’s the part that matters: whether your people are owed overtime has almost nothing to do with what you call them and almost everything to do with what they actually do all day. Job title is not a defense. Paying someone a salary is not a defense. There is a three-part test, and if a position fails any one part, overtime is owed at time-and-a-half for every hour past 40 in a week.

The three tests, in plain English:

  1. Salary basis. The person is paid a fixed, predetermined salary that doesn’t get docked when work is slow.
  2. Salary level. That salary is at least $684 per week — $35,568 per year. (We’ll get to why that number is lower than you may have heard.)
  3. Duties. The person’s actual, primary job duties fit one of the exemption categories: executive, administrative, professional, outside sales, or computer employee.

Fail any one of the three, and the employee is nonexempt. Overtime owed. No exceptions for good intentions.

Why the number is $35,568 and not $47,476

In 2016 the Department of Labor issued a Final Rule raising the salary threshold to $913 per week ($47,476 per year), effective December 1, 2016. That rule was blocked by a federal court injunction on November 22, 2016 — nine days before it was supposed to start — and it never took effect. A lot of articles from that era, including ours, described it as settled law. It wasn’t.

What actually took effect: a 2019 rule setting the threshold at $684 per week ($35,568 per year), with a separate threshold of $107,432 per year for highly compensated employees. The DOL tried to raise those numbers again in 2024; a federal court in Texas vacated that rule in November 2024. In May 2026 the DOL formally unwound the 2024 rule and restored the 2019 levels. So the numbers in force right now are the 2019 numbers: $35,568 for the standard exemptions, $107,432 for highly compensated employees.

The restoration-industry example, corrected

Our 2016 post used this example: a Production Manager on a $40,000 salary plus commissions, and told employers that wage was about to become illegal unless they pushed it to $47,000. That advice was wrong then and it’s wrong now — $40,000 is above the current $35,568 federal floor. The salary-level test passes.

But that’s not the end of the story, because the duties test is where restoration employers actually get hurt.

Take that same Production Manager. He’s salaried at $40,000. He runs water jobs, carries a moisture meter, pulls baseboards alongside the techs, and spends most of his week doing production work. He doesn’t supervise two or more full-time employees. He can’t hire or fire anyone. Under the executive exemption, that person is not exempt — the salary cleared the bar, but the duties didn’t. He is owed overtime for every hour past 40, regardless of the salary, regardless of the title.

Now flip it: a branch manager who runs the office, supervises three full-time estimators and a coordinator, and has real authority over hiring decisions — salaried at $40,000, that person likely clears all three tests and is properly exempt. Same salary, same industry, opposite answer. The duties decide, not the title and not the pay stub.

The roles that most often get misclassified in this business:

  • Technicians doing manual water, fire, or mold work. Nonexempt. Always. It doesn’t matter if they’re salaried, and it doesn’t matter what the offer letter calls them.
  • “Project managers” who mostly do production work. If the primary duty is running jobs with their own hands rather than managing people or exercising independent judgment on significant matters, the exemption usually fails.
  • Estimators and coordinators. Sometimes exempt under the administrative exemption (office work directly tied to running the business, real independent judgment), sometimes not. This one turns on the actual facts of the seat — get advice before you classify it.

Two more facts worth knowing: up to 10% of the salary level can be met with nondiscretionary bonuses and commissions paid at least annually (with a catch-up payment allowed at year-end), and computer employees can alternatively qualify at $27.63 per hour if paid hourly. Outside salespeople have no salary threshold at all — but they have to actually be outside salespeople, not inside staff with a sales title.

The math, because it matters

Say that $40,000 Production Manager is nonexempt and works 45 hours in a week.

  • Weekly salary: $40,000 ÷ 52 = $769.23
  • Regular rate: $769.23 ÷ 40 = $19.23/hour
  • Overtime rate: $19.23 × 1.5 = $28.85/hour
  • Overtime owed: 5 hours × $28.85 = $144.25 for that week

Get that wrong across a crew for two years and you’re not looking at a rounding error. Back wages, doubled as liquidated damages, plus the DOL doesn’t need a complaint to start asking questions. Misclassification penalties cost far more than the overtime would have.

The state-law trap

Everything above is federal law, and federal law is the floor. States can set a higher bar, and when they do, the higher bar wins. We recruit nationwide, so this one matters: as of 2026, California requires about $70,304 per year for exempt status, Washington requires about $80,168 statewide — the state ended its small/large-employer split in 2026, so that number applies to every Washington employer, downstate New York is around $66,300, and Colorado is about $57,784 — all well above the federal $35,568. An employee who is cleanly exempt under federal law can be nonexempt the moment they work in one of those states. If you have people in multiple states, you are running this analysis once per state, not once.

What to do about it

  1. Audit every salaried position against all three tests — salary basis, salary level, duties — in every state where you have people. Titles don’t count. Job descriptions help, but what the person actually does all day is what counts.
  2. Write down the duties. If you ever have to defend a classification, “that’s how we’ve always done it” is not documentation.
  3. Revisit it when roles change. The estimator who got promoted to “operations manager” but still writes every estimate herself may have been reclassified out of her exemption by the promotion.
  4. Talk to an employment attorney before you reclassify anyone. This article is general information, not legal advice, and the duties tests have more nuance than a blog post can carry.

The old version of this post told employers to push salaries to $47,000 to be safe. The safe move was never a number. It’s knowing what your people actually do, testing it against the law in the state where they do it, and fixing the classifications that don’t hold up — before a wage claim does it for you.


Resources to review

This article is general information about federal overtime law, not legal advice. Classification decisions should be reviewed with qualified employment counsel.

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