• Although more than half the states observe federal overtime regulations, certain states differ in their applications of such provisions.

Employers have faced lawsuits for wrongfully classifying employees as exempt. What may be less well-known is that employees can file claims under state or federal law. An employee can qualify for an exemption under federal guidelines but fail to meet exemption criteria under state law, and therefore be entitled to overtime under state law.

For example, federal regulations require that the “primary duty” consist of exempt work, even if the employee spends less than half the working time engaged in exempt duties. However, states may require that as much as 80 percent of working hours be spent performing exempt tasks.

Federal regulations require a minimum salary for many of the exempt categories, but a few states have established higher minimum salary requirements.

In addition, states may not allow the same deductions from salary as federal regulations do. For instance, federal revisions in 2004 allowed for unpaid suspensions of less than a full workweek in certain cases. However, some states do not recognize those revisions, so an unpaid suspension of less than a full workweek is not allowed in those states (the suspension could be imposed if the employee was paid a full salary for that week).

The following is a summary of state provisions that differ from federal regulations. More than half the states follow federal provisions, so only states with differences have been included.

Alaska

Minimum salary: To qualify as an exempt executive, administrative, or professional employee, the individual must be compensated on a salary or fee basis at a rate of not less than two times the state minimum wage for the first 40 hours of employment each week, exclusive of board or lodging furnished by the individual’s employer.

The state minimum wage is revised annually on January 1.

As state minimum wage increases, so will the minimum required salary for exempt employees. Even though the minimum salary is based on a specified number of hours, the salary generally cannot be prorated for part-time exempt employees. The purpose of listing a number of hours is to ensure that the salary requirement will increase along with the state minimum wage.

California

Minimum salary: California requires a minimum weekly salary equivalent to 40 hours at twice the state minimum wage.

Effective January 1, 2023, the threshold is $64,480 per year or $5,373.34 per month.

Effective January 1, 2024, the threshold is $66,560 per year or $5,546.67 per month.

Even though the minimum salary is based on a specified number of hours, the salary generally cannot be prorated for part-time exempt employees. The purpose of listing a number of hours is to ensure that the salary requirement will increase along with the state minimum wage. If a part-time exempt employee does not earn the required salary, the individual cannot be exempt, even if the duties otherwise meet the criteria. Improperly classifying a part-time employee as exempt may not cause problems in most states because the employee is unlikely to work more than 40 hours per week, and therefore wouldn’t get overtime anyway. However, California requires overtime after eight hours in a workday, unless the employee is working under an approved alternative workweek schedule.

Employers using hourly rates under the computer employee exemption should also check the minimum hourly rate under state law, which is revised each year.

Duties test: California requires that exempt employees (executive, administrative, professional, and computer employees) spend more than one-half of their working time engaged in exempt duties. The state uses the term “primarily engaged in” exempt work, rather than the federal “primary duty” standard.

Also, the state does not recognize the “concurrent duties” provision adopted for the executive exemption under 2004 federal regulations (29 CFR 541.106). California applies an earlier rule that requires considering the purpose of the duty and whether that duty or task is “helpful in supervising employees.”

For example, supervisors in a retail establishment might observe employees while engaged in mundane or nonexempt tasks such as stocking shelves or working a cash register. However, they cannot have such time counted when determining if they are “primarily engaged in” exempt work.

In addition, California does not recognize the “highly compensated employee” category for those earning more than $107,432 per year.

Deductions: Federal law allows salary deductions imposed as a penalty for violations of major safety rules. However, California has no such provision and does not allow these deductions. Further, the state follows federal regulations in effect prior to the 2004 revisions and does not allow unpaid disciplinary suspensions of less than one week.

Colorado

Minimum salary: The state’s Department of Labor and Employment (CDLE) adopted the final rule for the Colorado Overtime and Minimum Pay Standards Order (COMPS), which went into effect March 16, 2020. COMPS replaced the Colorado Minimum Wage Order (CMWO). Three key components include:

Duties test: Colorado requires that executives/supervisors spend a minimum of 50 percent of the workweek in duties directly related to supervision.

Also, under federal regulations, an outside sales employee must be “customarily and regularly” engaged away from the employer’s place or places of business. In Colorado, these employees must spend a minimum of 80 percent of the workweek in activities directly related to their own outside sales.

Finally, Colorado does not reference (and therefore may not recognize) the “highly compensated employee” category for those earning more than $107,432 per year.