The Fair Labor Standards Act: What Every A|E Firm Needs to Know in 2025

Navigate the complexities of overtime, exemptions, and compliance with confidence.

If you’re managing people in an architecture or engineering firm, chances are you’ve encountered the Fair Labor Standards Act (FLSA) in some way. Maybe it was during a heated discussion about whether your new graduate engineer should be classified as exempt or non-exempt. Or perhaps it came up when you were trying to figure out if travel time to a job site counts as compensable hours.

The truth is, the FLSA has been a moving target lately. There have been many changes in the past few years, with the minimum salary threshold changing back and forth as each new administration was elected. The good news? At this moment, nothing has changed from where we were in 2019.

Here’s the latest: On April 26, 2024, the U.S. Department of Labor published a final rule that increased the minimum salary threshold, but on November 15, 2024, the U.S. District Court for the Eastern District of Texas vacated that rule. So, we’re back to the 2019 standards—the Department is now applying the minimum salary level of $684 per week and total annual compensation requirement for highly compensated employees of $107,432 per year.

But here’s the catch: employers should stay alert to potential future changes, as lawsuits regarding the 2024 final rule are currently pending in other federal district courts, and the United States has filed a notice of appeal.

Let’s dive into what you need to know to keep your firm compliant and your employees properly classified.

The FLSA Basics: More Than Just Minimum Wage

The Fair Labor Standards Act isn’t just about paying people $7.25 an hour (the federal minimum wage since 2009). It’s the foundation that determines who gets overtime pay and who doesn’t. And in our industry, where project deadlines can mean long hours, getting this right is crucial.

The Two Types of Workers

The FLSA creates two distinct categories of workers:

Exempt Employees are exempt from overtime because of the type of work they perform AND their salary level. There are four main categories: Executive, Administrative, Professional, and Outside Sales. Here’s the key: they can be paid a salary and still not qualify as exempt if they don’t meet the duties test.

Non-exempt Employees must receive overtime pay for any hours worked over 40 in a workweek. This includes most production workers and many others who don’t meet the strict exemption criteria.

The 40-Hour Rule (And Why It’s Not Negotiable)

Non-exempt workers are entitled to overtime pay at one and one-half times their regular rate for all hours worked over 40 per workweek. Notice we said “workweek,” not pay period.

Here’s a quick example that trips up many employers:

Real-World Scenario: Your CAD technician earns $20.00/hour and is paid biweekly. Week 1: 50 hours. Week 2: 35 hours.

Week 1: $20.00 × 40 = $800 + $30.00 × 10 = $300 OT
Week 2: $20.00 × 35 = $700
Total: $1,800

You cannot average the 85 hours over two weeks. Each week stands alone.

The “Suffer Work” Concept (Yes, That’s Really What It’s Called)

Here’s where it gets interesting. The FLSA uses the archaic term “suffer work,” which essentially means the employee must actually perform work to be entitled to overtime.

So in our example above, if the employee took a vacation day during that 50-hour week, they actually only “suffered work” for 42 hours, meaning only 2 hours of overtime, not 10.

Common FLSA Scenarios That Keep A|E Firms Up at Night

Over the years, the Department of Labor has clarified many situations that are particularly relevant to our industry:

• Working overtime without approval? Still, overtime pay is required.
• Answering emails during lunch at your desk? That’s compensable time.
• Mandatory lunch-and-learns? Compensable. Voluntary ones? Not compensable.
• Travel time for non-exempt employees? Here’s where it gets complex...

The Travel Time Dilemma

For non-exempt employees traveling outside regular working hours (like a 3 PM to 10 PM flight), only the regular 8-hour workday counts toward overtime calculations.

Travel time to work sites generally isn’t compensable under FLSA standards—except for the driver. However, in the A|E industry, many firms choose to compensate this time anyway as a recruiting and retention tool. Even construction and surveying firms, where travel is standard, often use this as a competitive advantage.

The $684 Per Week Rule: Your Exemption Baseline

All exempt categories share one common requirement: a minimum salary of $684 per week ($35,568 annually). But remember—meeting the salary threshold is just the starting point. Employees must also pass the duties test for their specific exemption category.

Individual States’ Overtime Rules May Vary

It can get complex, especially if you have offices in multiple states. California, Alaska, and Nevada have laws mandating overtime pay after an employee works more than eight hours in a single day. Other states have daily overtime rules, but the specific number of hours varies (e.g., Colorado – 12 and Oregon – 10). Always check state requirements, too.

What the FLSA Doesn’t Require (But State Laws Might)

The federal FLSA doesn’t mandate:

• Vacation, holiday, severance, or sick pay
• Meal or rest periods
• Premium pay for weekend or holiday work
• Pay raises or fringe benefits
• Discharge notices or immediate payment of final wages

However, many states have their own requirements for these items, so always check your local laws.

Recordkeeping: Your Best Defense

The FLSA requires employers to maintain specific records. The good news? Most of this information is typically kept during normal business operations. For employees subject to minimum wage and/or overtime provisions, you must keep:

1. Personal information (name, address, occupation, sex, birth date if under 19)
2. When the workweek begins
3. Total hours worked each day and week
4. Total daily or weekly straight-time earnings
5. Regular hourly pay rate for overtime weeks
6. Total overtime pay for the workweek
7. Wage deductions or additions
8. Total wages paid each pay period
9. Payment date and pay period covered

Pro tip: You don’t need specific forms or time clocks—just accurate records in whatever format works for your business.

A|E Industry Hot Topics

The Professional Exemption Debate

Remember the controversy over intern architects and engineers-in-training? The question was whether they were exempt due to professional status or non-exempt because they required supervision more than 50% of the time.

Today’s trend: Architects and engineers with college degrees are generally considered exempt from day one. However, many firms still have their own criteria—some consider new graduates non-exempt for the first year, others only consider registered professionals exempt.

The bottom line: If your firm follows different rules than the FLSA minimum, document it, communicate it clearly, and follow it consistently.

The Designer Dilemma

What about designers who came up through the ranks without degrees? This issue has largely resolved itself through attrition, but these employees likely wouldn’t meet the learned professional exemption. They might, however, qualify as creative professionals—the question is determining when a designer crosses that threshold.

Administrative Staff: The 50% Rule

Here’s where many A|E firms get tripped up. An administrative employee who spends time on both management/business operations AND billable project work needs careful analysis, such as a Project Management Assistant, Administrator, or Accountant (PMA).

The test: If they have a utilization rate of more than 50% of their time, they’re likely non-exempt, regardless of their title or degree.

Marketing Personnel: Degrees Don’t Equal Exemptions

A college degree doesn’t automatically create an exemption. Marketing staff need job descriptions that clearly define their duties and demonstrate the exercise of judgment and discretion required for exemption status.

Bonuses and Overtime: The Discretionary Distinction

When calculating overtime wages, non-discretionary bonuses must be included in the overtime calculation. Discretionary bonuses (typically holiday, profit-sharing, or performance bonuses) don’t need to be included.

Most bonuses in the A|E industry are discretionary, but include clear language in your employee manual to avoid confusion during an audit.

The Timesheet Imperative

Here’s some hard-earned wisdom: overtime issues are never a problem until they become one—usually with a disgruntled employee filing a complaint. Without timesheets, it becomes your word against theirs.

Best practice: Require complete, accurate timesheets for ALL salaried employees, even when they’re just charging time to overhead.

Special Considerations: Nursing Mothers

Under the PPACA amendment to FLSA Section 7, firms with more than 50 employees must provide reasonable break time for non-exempt nursing mothers for up to one year. You must provide a private space (not a bathroom) that’s shielded from view and free from intrusion. The break time doesn’t need to be compensated.

Quick Reference: FLSA Exemption Categories

Executive Exemption

• Primary duty: Managing the enterprise or a recognized department
• Supervision: Directs two or more full-time employees
• Authority: Can hire/fire employees
• Salary: At least $684/week

Learned Professional Exemption

• Primary duty: Requires advanced knowledge in science or learning acquired through prolonged specialized courses
• Discretion: Regularly exercises discretion and judgment
• Salary: At least $684/week

Creative Professional Exemption

• Primary duty: Work requiring invention, imagination, originality, or talent in recognized artistic/creative fields
• Discretion: Regularly exercises discretion and judgment
• Salary: At least $684/week

Administrative Exemption

• Primary duty: Office/non-manual work related to management or business operations
• Discretion: Regularly exercises discretion and judgment on matters of significance
• Salary: At least $684/week

Computer Professional Exemption

• Primary duty: Systems analysis, design/development/testing of computer systems or programs
• Pay: At least $27.63/hour if hourly OR $684/week if salaried

Outside Sales Exemption

• Primary duty: Making sales or obtaining orders/contracts for services
• Location: Customarily and regularly engaged away from employer’s place of business
• No minimum salary requirement

Staying Compliant in an Ever-Changing Landscape

The FLSA landscape continues to evolve, and the recent court decisions remind us that regulatory changes can be reversed. The key to compliance is staying informed, maintaining accurate records, and regularly reviewing your employee classifications.

Remember: These salary thresholds are subject to change. Always research the latest amounts and consult with employment law counsel when in doubt.

The bottom line? The FLSA might seem complex, but understanding its core principles and staying current with changes will help protect your firm from costly violations while ensuring your employees are properly classified and compensated.

This article provides general information about the Fair Labor Standards Act as it applies to A|E firms. For specific situations or legal advice, consult with qualified employment law counsel.