Work Rights · Employment Basics
Minimum wage, overtime and working hours
There's a federal minimum wage, but many states and cities set a higher one — and where they differ, you get the higher rate. Overtime rules depend on whether your role is classified as exempt.
Your pay is protected by federal law through the Fair Labor Standards Act (FLSA), which sets minimum wage and overtime rules. However, the rules vary significantly by state and city—and you're always entitled to whichever is highest. Understanding these rules protects your rights and helps you know what to expect.
Federal versus state and local minimum wage
The federal minimum wage is $7.25 per hour, but it has not changed since 2009. Many states and cities have set their own minimum wages that are significantly higher. The rule is simple: you are entitled to the highest minimum wage that applies to you—whether that's the federal floor, your state's rate, or your city's rate.
Currently, 30 states plus Washington, D.C., have set minimum wages above the federal floor. In addition, 63 cities and counties have set rates higher than their state minimum. For example, in 2026, Washington, D.C., has the highest rate at $17.95 per hour, Washington state is $17.13 per hour, and California is $16.90 per hour. Meanwhile, five states (Alabama, Louisiana, Mississippi, South Carolina, and Tennessee) have no state minimum wage law and use the federal rate of $7.25.
The key point: it does not matter where your employer is registered or where the company headquarters is located. What matters is where you physically perform your work. If you work in a city or state with a higher minimum wage than your employer's headquarters, you must receive the higher rate. Remote workers are subject to the minimum wage of their home jurisdiction, not where the company is based.
Overtime rules: exempt versus non-exempt
Not all workers receive overtime pay. Whether you do depends on your job classification—specifically, whether you are 'exempt' or 'non-exempt' under the FLSA.
Non-exempt workers and overtime
Most workers are non-exempt, meaning they are covered by overtime rules. If you are non-exempt, you must receive overtime pay at 1.5 times your regular rate (often called 'time and a half') for any hours worked over 40 in a single workweek. A workweek is a fixed period of seven consecutive 24-hour days—usually Monday through Sunday, but your employer defines it.
This applies regardless of when you work. The FLSA does not require extra pay for weekend, night, or holiday work—only for hours over 40 in the workweek. For example, if you work 50 hours in a week, you receive your regular rate for 40 hours and 1.5 times your regular rate for the 10 overtime hours.
Overtime rules may vary by state, and some states require overtime pay after fewer hours (such as daily overtime), so check your state's Department of Labor website.
Exempt employees
Some employees are classified as 'exempt,' meaning they do not receive overtime pay. To be classified as exempt, you must meet all three of these tests:
- You are paid on a salary basis (you receive a fixed salary regardless of hours worked, not hourly pay).
- Your salary is at least $684 per week ($35,568 per year).
- Your primary job duties fall into a permitted category—usually executive, administrative, professional, computer professional, or outside sales.
Just having a high salary or being called a 'manager' does not automatically make you exempt. Your actual job duties must meet strict criteria set by the Department of Labor. For example, manual laborers, construction workers, electricians, and other blue-collar workers cannot be classified as exempt no matter how much they earn. Similarly, some states (like California and New York) do not recognize certain federal exemptions.
Misclassifying workers as exempt when they should be non-exempt is a common payroll violation. If you believe you are incorrectly classified and should be receiving overtime, document your hours and job duties, and consider contacting your state's Department of Labor or a legal professional.
Tipped workers: special rules and risks
Tipped workers—anyone who regularly receives more than $30 per month in tips—are subject to special minimum wage rules. This includes restaurant servers, bartenders, hotel staff, and delivery drivers. Be aware that these rules vary significantly by state and that tipped work is a common source of underpayment.
Federal tipped minimum wage
The federal tipped minimum wage is $2.13 per hour—far below the regular federal minimum wage of $7.25. Employers can pay this subminimum wage only if the employee's tips make up the difference. If your tips plus your $2.13 base wage do not equal $7.25 per hour, your employer must pay you enough to reach $7.25. This calculation is done for each pay period.
Your employer can claim a 'tip credit' (the $5.12 difference between $2.13 and $7.25), but only if: (1) you are told in advance that a tip credit will be used, (2) you retain all your tips, and (3) tips plus the base wage meet at least the minimum wage.
State and local tipped wage rules
Many states set higher minimum wages for tipped workers—and some prohibit the subminimum wage entirely. Seven states do not allow a separate tipped minimum wage and require employers to pay tipped workers the full state minimum wage: Alaska, California, Minnesota, Montana, Nevada, Oregon, and Washington. In these states, tips are purely supplemental income and do not reduce what your employer must pay you.
Other states set a tipped minimum wage between the federal floor and their full state minimum. For example, Massachusetts has a tipped minimum wage of $6.75 per hour (against a $15 state minimum), meaning your employer can claim a tip credit but must still ensure your total pay reaches $15. Rules vary widely, so check your state Department of Labor website.
Calculating your pay: key takeaways
- You are always entitled to whichever is highest: federal, state, or local minimum wage.
- Check the exact rate where you work, not where your employer is based.
- Most workers are non-exempt and entitled to 1.5 times pay for hours over 40 per week.
- Exempt classification requires a salary of at least $684/week and duties in an allowed category; being salaried alone does not make you exempt.
- Tipped workers must reach the applicable minimum wage; if tips fall short, your employer must pay the difference.
- Seven states require tipped workers to be paid the full state minimum wage with no subminimum allowed.
- All hours worked must be paid, including off-the-clock time.
When in doubt, ask your HR department or manager for clarification on your classification and wage calculation. You can also contact your state's Department of Labor Wage and Hour Division—they enforce these rules and can advise you on your rights at no cost.
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