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Wages and Overtime Explained

As of January 2025, the federal minimum wage set by the Fair Labor Standards Act (FLSA) is $7.25 per hour. However, many states have enacted higher minimum wages. In such cases, employees are entitled to receive the higher of the federal or state rate.

Workers classified as non-exempt under the FLSA must receive overtime pay of 1.5 times their regular hourly rate for all hours worked over 40 hours per workweek (a consistent 168-hour period).

The FLSA also includes rules on what counts as work hours, recordkeeping requirements, and child labor protections.

Exempt vs. Non-Exempt Employees

U.S. employees are generally categorized as either exempt or non-exempt, which affects their eligibility for overtime pay and minimum wage protections.

Non-Exempt Employees

• Entitled to minimum wage and overtime pay.

• Typically includes hourly workers.

• Must receive 1.5x pay for hours beyond 40 in a week.

• Can file a claim with the U.S. Department of Labor if not paid properly.

Exempt Employees

• Not entitled to overtime pay under the FLSA.

• Common exempt roles include executives, administrative staff, and certain sales or IT professionals.

To qualify as exempt, an employee must:

1. Earn at least $684 per week or $35,568 annually,

2. Be salaried (not paid hourly),

3. Perform exempt job duties.

Types of Exempt Job Duties

Executive Exemption

• Manages a department or the entire company.

• Supervises two or more employees.

• Has authority in hiring and firing decisions.

Administrative Exemption

• Performs non-manual office work tied to business operations.

• Examples: HR professionals, payroll staff, accountants.

• Must meet the $684 salary threshold.

Professional Exemption

• Includes both learned professionals and creative professionals.

• Must earn at least $684 per week.

• Learned professionals perform work requiring advanced knowledge (e.g., lawyers, doctors, teachers).

• Creative professionals rely on creativity and originality (e.g., musicians, writers, designers).

Other FLSA Exemptions

Some additional roles qualify for exemption:

• Computer professionals earning at least $684/week or $27.63/hour (e.g., programmers, system analysts, software engineers).

• Outside sales employees who work primarily outside the office and are focused on generating sales or contracts.

Roles That Are Not Exempt

The FLSA’s exemptions primarily apply to white-collar jobs. Workers who perform manual labor or physical tasks are almost always non-exempt, regardless of pay level.

Common non-exempt occupations include:

• Construction workers

• Electricians

• Mechanics

• Plumbers

• Ironworkers

• Carpenters

• Maintenance staff

First Responders:

Public safety workers like police officers, firefighters, paramedics, and correctional officers are also non-exempt, even if they meet salary or duty requirements. Their essential tasks, such as emergency response and crime prevention, exclude them from exemption status.

A Brief History of Time Cards and Clocks

The concept of recording work hours dates back to the late 1800s during the rise of industrialization. Early factories needed a more reliable way to monitor employee time.

Milestone inventions:

• 1888: William Bundy created the Bundy Key Recorder, a machine that logged time with a keyed entry system.

• 1888: Dr. Alexander Dey introduced the Dey’s Dial Recorder, where employees selected their ID on a dial to mark their work hours.

• 1894: Daniel M. Cooper developed the Rochester Time Recorder, the first to print clock-in and clock-out times on a card inserted by the employee.

The Evolution of Time Tracking

As companies grew in the 20th century, demand for accurate time tracking surged. IBM (then known as the International Business Machines Corporation) established a Time Recorder Division under Thomas J. Watson. They developed systems that even printed red stamps for late arrivals—a big step forward in automation and accountability.

Modern Time Tracking Technologies

Today, businesses rely on advanced tools like:

• RFID badges

• Magnetic stripe cards

• Biometric systems (fingerprint or facial recognition)

These modern time clocks offer better accuracy, security, and automation compared to traditional paper time cards.