Overtime Pay Changes: Overtime pay is a crucial aspect of employment law in the United States, ensuring that workers receive fair compensation for hours worked beyond the standard workweek. As of 2025, several significant changes and legal updates have impacted overtime regulations, affecting millions of employees and employers. This guide breaks down the latest federal and state regulations, legal developments, and practical steps for workers and businesses to navigate the evolving landscape of overtime pay in 2025.
Overtime Pay Changes
Navigating overtime pay in 2025 requires understanding federal and state laws, keeping up with new legislative proposals, and ensuring compliance. Whether you’re an employee or employer, being informed about these changes can help you avoid legal issues and maximize earnings. Employers should review classifications and adjust salaries, while workers should track their hours and seek guidance if needed.
| Aspect | Details |
|---|---|
| Federal Overtime Threshold | The salary threshold for overtime exemption remains $684 per week ($35,568 annually). |
| Proposed 2024 Rule | A new rule aimed to increase the threshold to $58,656 per year, but was blocked by a federal court. |
| State-Specific Thresholds | Some states have higher minimum salaries for overtime exemption. For example, California’s is $1,320 per week ($66,560 annually). |
| Legal Developments | Federal court blocked the 2024 overtime rule, arguing that the DOL overstepped its authority. |
| Employer Actions | Employers should review classifications, adjust salaries, and stay updated on state-specific regulations. |
| Recent Legislative Proposals | The “KEEP Act” proposes eliminating federal income tax on overtime pay. |
What is Overtime Pay?
Overtime pay refers to the additional compensation owed to employees who work beyond 40 hours per week. Under the Fair Labor Standards Act (FLSA), non-exempt employees must receive 1.5 times their regular pay rate for each overtime hour worked.
However, not all employees qualify for overtime. Some are classified as exempt if they meet specific salary and duties tests, typically under executive, administrative, or professional roles.
Federal Overtime Regulations in 2025
The Proposed 2024 Rule & Its Legal Block
In April 2024, the U.S. Department of Labor (DOL) announced a new rule aiming to:
- Increase the minimum salary threshold to $844 per week ($43,888 annually) in July 2024.
- Further increase the threshold to $1,128 per week ($58,656 annually) in January 2025.
- Raise the “highly compensated employee” exemption to $151,164 annually.
However, on November 15, 2024, a federal judge in Texas blocked the rule, stating that the DOL exceeded its authority. As a result, the salary threshold remains at $684 per week ($35,568 annually).
State-Specific Overtime Regulations
Since states can enforce their own higher salary thresholds, it’s essential to know your state’s requirements:
States with Higher Overtime Salary Thresholds
- California: $1,320 per week ($66,560 annually).
- Washington:
- Employers with 1-50 employees: $1,332.80 per week ($69,305.60 annually).
- Employers with 51+ employees: $1,499.40 per week ($77,968.80 annually).
- Alaska: $952.80 per week ($49,545.60 annually), increasing to $1,040 per week in July 2025.
Employers should check their state labor department for up-to-date regulations.
Proposed Legislative Overtime Pay Changes: No Tax on Overtime?
A new proposed law could benefit millions of workers. The KEEP Act (Keep Every Extra Penny Act), supported by former President Donald Trump, aims to eliminate federal income tax on overtime pay.
While the bill has passed in the House of Representatives, it still needs Senate approval before becoming law. If enacted, employees would keep more of their overtime earnings without federal deductions.
Common Myths About Overtime Pay
Myth 1: “If I’m Salaried, I Don’t Get Overtime”
Not true! Salaried employees are eligible for overtime if they earn below the salary threshold ($684 per week federally or a higher state requirement).
Myth 2: “Employers Can Avoid Overtime by Calling Me an Independent Contractor”
Wrong! Misclassifying employees as contractors violates labor laws. If your employer controls your work hours and duties, you might be misclassified.
Myth 3: “Overtime Pay is Optional”
No, it’s federal law. Employers must pay 1.5 times the regular wage for any overtime worked, unless an exemption applies.
Real-World Case Studies
Case 1: Tech Employee in California
Lisa, a software engineer in California, was earning $55,000 annually. In 2025, her employer classified her as exempt from overtime. However, since her salary was below $66,560 per year, she should have received overtime pay for her 50-hour workweeks.
Lisa filed a wage claim with the California Labor Commissioner, resulting in a settlement of unpaid overtime wages.
Case 2: Retail Worker in Texas
John, a retail manager in Texas, was classified as an exempt employee despite earning only $40,000 per year. Under federal law, he was entitled to overtime pay. After consulting a labor attorney, he successfully recovered back pay for unpaid overtime hours.
Employer Responsibilities & Best Practices
- Review Employee Classifications: Ensure employees are correctly classified as exempt or non-exempt.
- Adjust Salaries If Necessary: Employees close to the exemption threshold may need salary adjustments.
- Accurate Time Tracking: Use reliable time-tracking systems to monitor overtime.
- Stay Updated on Laws: Labor laws are evolving—subscribe to DOL updates.
- Consult Legal Counsel: Seek HR or legal advice to ensure compliance.
Overtime Pay Eligibility Restored to 2019 Levels After Court Ruling
US Supreme Court Lowers Burden of Proof for Employers in Overtime Disputes
State Overtime Thresholds Rise in US in 2025: Is Your Business Prepared?
Frequently Asked Questions (FAQs)
1. How do I know if I’m eligible for overtime pay?
If you earn below $684 per week federally (or a higher state threshold) and are not in an exempt role, you must be paid overtime.
2. Does my state have different overtime rules?
Yes. Some states, like California and Washington, have higher salary thresholds for overtime exemption.
3. Can an employer refuse to pay overtime?
No. FLSA requires overtime compensation, and refusal to pay can lead to legal action.
4. What should I do if my employer isn’t paying overtime?
- Document your hours worked.
- Report the issue to HR.
- File a complaint with the Department of Labor.
