Overtime for Salaried Employees in Texas

November 16th 2024

Overtime for salaried employees in Texas is governed by federal regulations under the Fair Labor Standards Act (FLSA).

The eligibility for overtime depends on factors like job responsibilities, salary level, and whether the employee meets the FLSA’s exemption criteria.

This article unpacks the rules for overtime in Texas, including who qualifies, how it’s calculated, and the laws employers must follow.

This Article Covers:

Do Salaried Employees Qualify for Overtime in Texas?

Salaried employees in Texas may qualify for overtime pay under federal regulations set by the FLSA. 

Whether an employee is eligible depends on their classification as either exempt or non-exempt.

To be classified as exempt in Texas, salaried employees must meet the following criteria:

  • Fixed Salary Requirement: Employees must receive a guaranteed, predetermined salary that does not fluctuate based on hours worked or work quality.
  • Minimum Salary Threshold: As of July 2024, employees in Texas must earn at least $844 per week (or $43,888 annually) to be considered as exempt from overtime.
  • Job Duties Test: The primary job responsibilities must involve executive, administrative, or professional tasks as defined by the FLSA.

*It’s important to note that specific roles, such as outside sales professionals, agricultural workers, and employees of motion picture theaters, are automatically exempt from overtime under FLSA guidelines. Certain roles in transportation, law enforcement, and public safety are also included.

Here is the full list of jobs exempt from overtime in Texas.

If a salaried employee does not meet all three criteria, they are considered non-exempt and are entitled to overtime pay for any hours worked beyond 40 in a week.

Misclassifying employees as exempt is a common issue and can lead to legal consequences for employers.

What is the Overtime Exemption Rate for Salaried Employees in Texas? 

The overtime exemption rate for salaried employees in Texas follows the updated federal standard under the FLSA. 

To qualify as exempt from overtime pay in Texas, an employee must earn at least $844 per week, which equals $43,888 annually.

Since Texas does not impose additional state-specific overtime laws, the federal exemption rate is used across the state. 

However, meeting the salary threshold alone is not enough—employees must also pass the FLSA’s job duties test to be considered exempt. 

Employers must remain vigilant in ensuring compliance with these standards to avoid penalties and protect their workers’ rights.

Download U.S. Overtime Exemption Salary Threshold 2024 Poster now.

How is the Overtime Rate Determined for Salaried Employees in Texas?

Salaried non-exempt employees in Texas are entitled to overtime pay for any hours worked beyond 40 in a week. 

Under the FLSA, overtime is typically calculated at 1.5 times the employee’s regular hourly rate—commonly called “time and a half”.

To calculate the regular hourly rate, divide the weekly salary by the number of hours it covers. If the hourly rate falls below the federal minimum wage of $7.25, adjustments must be made to meet this standard.

Here’s a step-by-step breakdown with an example:

  • Determine the regular hourly rate

Divide the weekly salary by the standard hours worked.

$900 ÷ 40 = $22.50/hour

  • Calculate the overtime rate

Multiply the regular hourly rate by 1.5 to determine the overtime rate.

$22.50 × 1.5 = $33.75/hour

  • Calculate overtime pay

For the 10 extra hours worked:

10 × $33.75 = $337.50

  • Calculate total pay for the week

Add the overtime pay to the weekly salary:

$900 + $337.50 = $1,237.50

*Consideration for Fluctuating Workweeks: If the employee’s schedule varies each week, and they qualify under the Fluctuating Workweek Method (FWW), their overtime pay might be calculated differently—at 0.5 times their hourly rate instead of 1.5. Always confirm eligibility before applying this method.

For a detailed guide on calculating overtime pay in Texas, check out our article: How Do You Calculate Overtime Pay in Texas?

What Laws Govern Salaried Employee Overtime in Texas?

Overtime for salaried employees in Texas is primarily governed by the Fair Labor Standards Act (FLSA). Federal law takes precedence over state law if there is a conflict.

Texas law allows public-sector salaried employees to receive compensatory time instead of overtime pay. 

Compensatory time is accrued at 1.5 hours per overtime hour worked and is subject to limits, such as 240 hours for most employees. When these limits are exceeded, employees must be paid overtime.

The U.S. Department of Labor’s Wage and Hour Division (WHD) enforces the FLSA, investigating employers for overtime violations and ensuring compliance across payroll systems. 

Meanwhile, the Texas Workforce Commission (TWC) allows employees to file wage claims for unpaid overtime, which must be submitted within 180 days. 

Unlike the WHD, the TWC focuses on individual claims rather than broader employer practices. These agencies work in tandem to protect salaried employees’ rights.

Legal Cases on Overtime Violations in Texas

1. Houston Software Company Ordered to Pay Damages for Misclassifying Salaried Employees

In the case of Novick v. Shipcom Wireless, Inc., Shipcom Wireless, Inc. (Shipcom) was found to have misclassified several employees as exempt from overtime under the Fair Labor Standards Act (FLSA). 

Shipcom is a Houston-based supply chain technology company specializing in inventory management systems, including its flagship software, Catamaran, which is used in various industries, including healthcare.

The employees, hired to train and implement inventory software for Veterans Affairs (VA) hospitals, were paid annual salaries and classified as exempt, despite working over 40 hours per week.

An internal audit led Shipcom to reclassify some roles, including trainers, as nonexempt and pay back wages to current employees. 

However, former employees, such as Justin Novick (Novick), were excluded from these back payments despite having logged significant overtime hours while employed at Shipcom. 

This exclusion became a key point of contention, leading Novick and other former employees to file a lawsuit claiming unpaid wages and improper classification.

The case was initially heard in the United States District Court for the Southern District of Texas, where a jury determined that Shipcom had misclassified these employees as exempt, violating the FLSA’s overtime provisions. 

The court awarded actual damages for unpaid overtime along with liquidated damages, doubling the financial penalty due to Shipcom’s lack of good faith. 

Key Lessons from the Case:
  • Employers must carefully evaluate job duties and FLSA criteria to avoid misclassification and overtime violations.
  • Internal audits are critical but must address both current and former employees to ensure full compliance and prevent overtime violations.
  • Misclassification can lead to substantial financial penalties, including liquidated damages and back pay for overtime violations.
  • Evidence from audits can be used in court, highlighting the need for transparency and proper recordkeeping to avoid misclassification.

For more details on overtime regulations in Texas, explore our Texas Overtime Laws guide.

Important Cautionary Note

This content is provided for informational purposes only. While we make every effort to ensure the accuracy of the information presented, we cannot guarantee that it is free of errors or omissions. Users are advised to independently verify any critical information and should not solely rely on the content provided.