State Overtime Rules for Small Businesses: Why the Federal Floor Is Just the Starting Point

The Federal Rule Is Just the Minimum

When small business owners think about overtime compliance, the conversation usually starts and ends with the federal Fair Labor Standards Act (FLSA): pay one and a half times the regular rate for hours worked over 40 in a workweek, and make sure anyone you classify as exempt earns above the federal salary threshold ($684 per week as of mid-2026, following the 2024 court ruling that vacated the Biden administration's proposed increase).

That federal floor matters. But it is not the whole picture.

More than a dozen states have their own overtime laws that go further than the federal rules. Some require overtime to kick in after 8 hours in a single day, not just 40 hours in a week. Several set salary thresholds for overtime exemptions that are two to three times higher than the federal floor. And when state law is more generous to employees than federal law, employers are required to follow the state rule.

If you have employees in any of these states, or if you are expanding into them, the FLSA is the starting point, not the finish line.

What Makes State Overtime Rules Different

There are two main ways state overtime rules can be stricter than federal law.

Higher Salary Thresholds

The federal salary threshold for classifying an employee as exempt from overtime is $684 per week ($35,568 annually). An employee must earn at least that amount to be considered exempt under any of the white collar exemptions (executive, administrative, professional). If they earn less, they are entitled to overtime pay regardless of their job title or duties.

Several states have set their own thresholds well above that federal number. So even if an employee clears the federal bar, you may still owe them overtime under state law because their salary does not meet the state minimum.

Daily Overtime

Federal law calculates overtime on a weekly basis. Work 50 hours one week and 30 the next, and you owe overtime for the 10 extra hours in the first week, nothing extra for the slow week.

Some states go further and require overtime pay when an employee works more than a set number of hours in a single day, even if their weekly total is under 40. This catches businesses that run long shifts or double shifts, particularly in industries like food service, retail, and healthcare.

The States to Watch

California

California has the most aggressive overtime rules in the country and the ones most likely to catch out-of-state employers off guard.

On the salary threshold side, California ties its exemption minimum to the state minimum wage. The threshold is set at two times the state minimum wage multiplied by a full-time 40-hour schedule, adjusted annually as the minimum wage changes. As of 2025, that works out to roughly $1,320 per week ($68,640 annually), nearly double the federal floor.

On the daily side, California requires overtime pay (1.5x) for any hours worked beyond 8 in a single day and double time for any hours beyond 12 in a single day. Employees who work a seventh consecutive day in a workweek also earn overtime on the first 8 hours of that day and double time after that.

The combination of the high salary threshold and the daily overtime rules makes California one of the most complex states to manage payroll in. If you have a single employee in California, these rules apply.

New York

New York's exemption thresholds vary by region and are among the highest in the country.

Employees working in New York City, Long Island (Nassau and Suffolk counties), and Westchester County face the highest threshold. As of the most recent annual adjustment, that figure is approximately $1,200 per week for those regions. Employees in the rest of New York State have a slightly lower threshold, though still well above the federal floor.

New York updates these thresholds annually, so the precise figure changes each year. The state Department of Labor publishes the current threshold, and this is one to verify every January if you have New York employees.

New York does not have a general daily overtime rule, but it does have specific daily overtime requirements in certain industries, particularly agriculture. If you operate in a regulated industry in New York, check the industry-specific wage orders rather than assuming the general rules cover everything.

Washington State

Washington ties its overtime exemption threshold to the state minimum wage in the same way California does, at two times the minimum wage for a 40-hour week. Washington's minimum wage is among the highest in the country and increases annually, which means the overtime exemption threshold also increases annually.

As of 2025, the threshold is roughly $1,332 per week ($69,305 annually), slightly higher than California's. An employee earning $60,000 a year would be exempt under federal law and California law but entitled to overtime pay under Washington State law.

Washington does not have a daily overtime rule, but the salary threshold alone makes it one of the more consequential states for employers who assume the federal floor is sufficient.

Colorado

Colorado adopted its own overtime and minimum pay standards through the Colorado Overtime and Minimum Pay Standards Order (COMPS Order), which the state updates regularly. The COMPS Order covers overtime, meal and rest breaks, and exemption requirements.

On the salary threshold, Colorado has set its own floor that exceeds the federal figure, currently in the range of $1,057 to $1,100 per week depending on the most recent COMPS update. The state also applies the threshold to a broader range of industries than federal law covers in some cases.

Colorado also has a daily overtime rule, though not as aggressive as California's. State law requires overtime for time worked beyond 12 hours in a single day or beyond 12 consecutive hours regardless of when the workday starts, whichever results in the greater number of overtime hours. If you run long shifts in Colorado, the daily rule may trigger overtime even when a worker's weekly total is under 40.

Alaska

Alaska requires overtime pay for hours worked beyond 8 in a single workday, in addition to the standard 40-hour weekly trigger. This daily overtime requirement applies broadly to covered employees and can significantly increase labor costs for businesses that regularly run shifts longer than 8 hours.

Alaska's salary exemption threshold is closer to the federal floor than the West Coast states, but the daily overtime rule is the practical trap for employers managing shift schedules.

Nevada

Nevada's daily overtime rules are tied to the employee's wage level. Employees earning less than 1.5 times the state minimum wage are entitled to daily overtime for hours worked beyond 8 in a single day. Employees earning above that threshold are subject only to the standard weekly overtime rule.

The tiered structure makes Nevada's rules more complex to administer than a simple daily threshold, because the daily rule may or may not apply depending on each employee's pay rate.

Multi-State Employers: The Layering Problem

If you have employees in multiple states, you need to apply each state's rules separately and then pay whichever results in the greater protection for the employee. You cannot average or offset.

Say you have employees in both Texas (no state overtime rules beyond FLSA) and Washington State. Your Texas employees follow federal rules. Your Washington employees follow Washington rules, including the higher salary threshold. You cannot apply the lower federal threshold to your Washington team because you use it for your Texas team.

For businesses expanding to a new state, this is one of the first compliance checks to run. The overtime rules, along with workers' compensation requirements and paid leave laws, are among the most impactful differences you will encounter.

Common Mistakes With State Overtime Rules

Assuming federal compliance equals full compliance. Federal compliance is necessary but not sufficient in states with stricter rules. An employee who clears the federal exemption salary does not automatically qualify as exempt in California, Washington, or New York if their salary falls below the state threshold.

Forgetting that thresholds update annually. States that tie their thresholds to the minimum wage update them every January. An employee who was properly classified as exempt in December may be non-exempt in February if you did not check for the annual update.

Applying weekly-only thinking in daily OT states. In California, Alaska, Nevada, and Colorado, a worker who puts in three 10-hour days and then takes two days off may be owed overtime even though their weekly total is only 30 hours. The daily trigger applies regardless of the weekly count.

Not adjusting for remote workers. If you are a Texas-based company and one of your employees moves to California and starts working remotely, California labor law now covers that employee. Where the employee performs the work generally determines which state's rules apply, not where your company is headquartered.

How to Stay Current

State labor laws change frequently. Minimum wage increases that flow through to overtime thresholds, new COMPS orders, and state-level rulemaking all create compliance obligations that appear with little fanfare. The federal Register gets attention; state equivalents often do not.

For the federal picture, see our earlier guide on federal overtime rules and FLSA basics, which covers the exemption tests, the current federal salary threshold, and the pending Fifth Circuit litigation over the 2024 rule.

Bizmoon monitors federal and state regulatory changes, including labor law updates, and flags the ones relevant to your business with plain-language summaries. Instead of checking the California Labor Commissioner's website and the Washington State L&I page and the Colorado COMPS order publication every January, you get one alert when something changes.

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