State Overtime Thresholds Rise in US in 2025 – Overtime laws in the United States are changing in 2025, and businesses must adapt to new state-specific salary thresholds for exempt employees. Employers who fail to comply could face penalties, lawsuits, and operational disruptions. This article explains the new overtime regulations, how they affect your business, and what steps you should take to stay compliant.
State Overtime Thresholds Rise in US in 2025
| Topic | Details |
|---|---|
| New Overtime Rule | Many states are increasing salary thresholds for exempt employees |
| Federal vs. State Laws | Some states have higher thresholds than federal law |
| Effective Dates | January 1, 2025, for most states |
| States Affected | California, New York, Washington, Colorado, Maine, Alaska, etc. |
| Business Impact | Possible reclassification of employees, increased payroll costs |
| Compliance Strategy | Review salary structures, adjust payroll, update policies |
| More Info | U.S. Department of Labor |
The 2025 state overtime threshold increases mean businesses must review employee classifications, adjust salaries, and ensure compliance to avoid penalties. By staying informed and making proactive changes, employers can manage payroll costs while protecting their workforce.
Understanding the 2025 Overtime Rule Changes
The Fair Labor Standards Act (FLSA) requires most employees in the U.S. to receive overtime pay if they work more than 40 hours per week, unless they qualify as “exempt.”
To be exempt, employees must meet two criteria:
- Job Duties Test: Their role must be classified as an executive, administrative, or professional position.
- Salary Threshold: They must earn above a certain salary set by federal or state law.
What Is Changing in 2025?
The federal overtime salary threshold was supposed to increase in 2024 and 2025 under a proposed rule. However, a court ruling in November 2024 blocked the federal increase, keeping the federal threshold at $684 per week ($35,568 annually).
Despite this, several states have moved forward with their own increases in 2025:
- California: $1,320 per week ($68,640 annually)
- New York: $1,237.50 per week ($64,350 annually) in NYC, $1,161.65 per week in other areas
- Washington: $1,332.80 per week ($69,305.60 annually) for small employers, $1,499.40 per week ($77,968.80 annually) for large employers
- Colorado: $1,086.25 per week ($56,485 annually)
- Maine: $845.21 per week ($43,951 annually)
- Alaska: $952.80 per week ($49,545.60 annually)
Employers must ensure they meet state-level exemptions if they operate in these jurisdictions.
Why This Matters for Businesses?
1. Compliance Risks
Failing to meet salary thresholds means employees become non-exempt, making them eligible for overtime pay. Non-compliance can lead to penalties, fines, and lawsuits.
2. Increased Payroll Costs
Businesses may need to raise salaries to keep employees exempt or pay overtime wages. Either option affects labor costs, so budget planning is essential.
3. Employee Classification Changes
Employers must reassess which roles qualify as exempt or non-exempt, affecting scheduling, benefits, and payroll processes.
4. Industry-Specific Considerations
Some industries, such as healthcare, retail, manufacturing, and hospitality, will be more affected due to higher overtime expenses and fluctuating work hours.
How to Prepare Your Business for the 2025 Changes?
Step 1: Review State Overtime Laws
Check if your business operates in states with higher salary thresholds. Use official resources like the U.S. Department of Labor or state labor websites.
Step 2: Audit Employee Salaries
Evaluate your current exempt employees:
- Are they earning above the new state thresholds?
- Will they need a pay adjustment or overtime eligibility?
Step 3: Adjust Payroll Strategies
If employees fall below the new threshold, you have two options:
- Raise their salary to maintain exempt status.
- Reclassify them as non-exempt and track overtime hours.
Step 4: Update Internal Policies
Modify HR policies and training to reflect changes:
- Ensure managers understand overtime rules.
- Communicate changes with employees to avoid misunderstandings.
Step 5: Implement Time-Tracking Tools
For newly non-exempt employees, install time-tracking software to monitor overtime accurately and avoid wage disputes.
Step 6: Consult a Labor Law Expert
State laws vary, and legal guidance can help prevent costly errors.
Step 7: Budget for Payroll Adjustments
Develop a financial plan to offset rising payroll costs, such as improving workflow efficiency, reducing unnecessary overtime, or adjusting workforce scheduling.
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FAQs
1. What is the federal overtime threshold in 2025?
The federal salary threshold remains at $684 per week ($35,568 annually) after a court ruling blocked planned increases.
2. Which states have higher overtime thresholds in 2025?
States with increases include California, New York, Washington, Colorado, Maine, and Alaska. Each state has different thresholds based on local labor laws.
3. What happens if I don’t follow the new overtime rules?
Non-compliance can lead to penalties, back pay claims, and lawsuits from employees. Businesses should ensure they meet state-specific requirements.
4. How do I know if my employees qualify as exempt?
To be exempt from overtime, employees must meet job duty requirements and earn above the salary threshold set by federal or state laws.
5. Should I raise salaries or reclassify employees?
It depends on your budget and operational needs. Raising salaries keeps employees exempt, but reclassifying them as non-exempt means paying overtime when applicable.
6. Where can I find official information?
Visit the U.S. Department of Labor website or check your state labor department’s website for specific rules.
