Iowa Labor Laws 101
Iowa labor laws are governed by the Iowa Workforce Development (IWD) agency. Iowa law applies to anyone working in the state, and particularly to those with salaried employment. In particular, Iowa has a minimum wage of $7.25, which is consistent with the federal minimum wage. In addition, there are laws governing employee time off, notices, termination, and breaks and meal periods.
Although Iowa operates within the federal framework for wage and hour laws, Iowa-specific laws can make a difference to each employee’s employment experience. For example, Iowa law differs in its application of overtime pay. While the federal government requires employers to pay employees overtime when they work more than 40 hours in a week, Iowa law requires that employees be paid overtime when they work more than 48 hours in a week. Additionally , Iowa law does not allow "comp time" as an alternative to overtime pay.
Another important area in which Iowa labor law differs from federal law is in relation to employee protections. Iowa law prohibits discrimination in the workplace and requires employers to provide an environment free from discrimination, harassment, and retaliation. If an employee feels that they have been subject to illegal acts or treatment in the workplace, the employee may file a complaint with the IWD.
Legally, IWD is an agency governed by the state of Iowa, but much of its operation is governed by federal guidelines. This means that while the minimum wage is set by the federal government, it is not unlawful for a state employee to earn more than this amount.
Definition of a Salaried Employee
To be classified as salaried in Iowa, the employee must meet the criteria to qualify as either exempt or non-exempt from the wage and hour requirements of the FLSA. An exempt employee is one who is not guaranteed a minimum wage or overtime pay. They are generally not subject to the minimum wage or overtime requirements of Iowa law as well (Iowa Code § 91D). In contrast, nonexempt employees are entitled to overtime pay and at least the minimum wage. All nonexempt employees must be paid a minimum wage of not less than $7.25 per hour beginning January 1, 2014. For instance, while a salaried employee such as a theater manager may be exempt from minimum wage and overtime requirements, he or she will necessarily be nonexempt if the annual salary is below $23,660 per year.
The FLSA exempts certain employees from the FLSA’s overtime provisions for executive, administrative, and professional employees. The DOL has discussed various tests for determining whether an employee is exempt or non-exempt. The most commonly used test is called the "salary basis test" where the employee earns a salary that does not subject him or her to earn less than the minimum wage for all hours worked or overtime for hours worked in excess of forty in a workweek. Generally, the salary must also be established without regard to the amount of work performed. However, employers can meet this standard for exempt employees by paying them a minimum of $455 per week ($23,660 annually) (29 U.S.C. § 13(a)(1); 29 C.F.R. § 541.602).
Salary Thresholds
Under Iowa law, an employee must be paid at least a minimum weekly salary of $1,865.38, paid on a salary basis, in order to qualify for the administrative, executive and professional (aka, white collar) exemptions to the minimum wage and overtime laws. This is based on prior Iowa case law that took into account the former federal salary threshold for these exemptions.
Generally, the federal salary threshold is higher, currently $684 per week. If an employee will be receiving the higher amount, then the Iowa requirement is no longer relevant, but it still specifies the minimum that must be paid under the state law.
Iowa law adopting the $1,865.38 threshold is currently under review. In a series of public hearings between April and June, 2022, the Iowa Workforce Development agency is gathering input from interested parties as to whether employers (and employees) would benefit from the elimination of the state minimum salary for white collar exemptions.
Under the proposed modification, the higher federal threshold would be the only applicable requirement, regardless of whether it is lower than the Iowa rate.
However, until further revisions are enacted, employers that treat their salaried employees as exempt based upon the higher federal threshold would potentially be violating the Iowa minimum wage law. There is no suggestion that such a scenario is being enforced, given the fact that the federal threshold remains higher, but there is also no indication that employees would be precluded from asserting a claim under state law even if they did not assert a claim under the FLSA.
Hours and Overtime Expectations
Iowa law applies the same minimum wage and overtime standards that the federal Fair Labor Standards Act (FLSA) does to blue collar workers. However, while the FLSA and Iowa law generally guarantee hourly workers overtime after 40 hours in a week, these laws exempt several categories of employees from overtime, including salaried workers.
For the most part, employees covered by the overtime exemption are those whose job responsibilities take them out of the scope of the protections the FLSA is meant to provide. In other words, those employees who perform exempt work, usually in professional, administrative or managerial capacities, are not entitled to overtime.
To be subject to an exemption under Iowa law, the employee must be paid a minimum of $33,000 annually, per FLSA rules.
While the FLSA has broad exemptions that cover many salaried employees, it provides an exception for a small group of employees. Iowa law is more specific and therefore provides additional guidance as to which employees are eligible for overtime. For example, both Iowa law and the FLSA provide an overtime exception for executives and managers. But Iowa law specifically exempts "restaurateurs, hotel and building superintendents, undertakers, ‘grabbers,’ quartermasters and employees of persons, firms or corporations which maintain restaurants in hotels." These categories do not appear explicitly in the FLSA.
While there are many aspects to workweek rules for salaried employees’ overtime that both Iowa and the FLSA do not regulate, the two laws do provide similar definitions for overtime exceptions, such as the executive, administrative and professional exemptions.
Importantly, states may have additional exemptions to the standard FLSA exemptions. Iowa does not have any state-specific exemptions for a position within the prescribed salary. As with other worker classifications, if the employee meets the duties and salary requirements of one of the exemptions, they are not entitled to overtime.
In addition to the general exemptions discussed above, Iowa law provides that employees who also serve on a volunteer fire department, ambulance service or rescue service are not entitled to overtime pay.
PTO and Leave Provisions
Iowa does not require employers to provide vacation or paid time off for any reason, including illness, and it is permissible to have a use-it-or-lose-it policy. However, if your employee handbook states that earned vacation will be paid out at the end of employment, you will have to pay the employee for any accrued and unused vacation, or the Handbook may be interpreted to provide for an accrued benefit.
Iowa has no law regulated paid sick leave for private employers. In fact, the Iowa legislature has twice rejected bills that would have imposed mandatory paid sick leave and expanded unpaid family and medical leave. It is unlawful for an employer to terminate or discriminate against an employee who (1) is granted leave pursuant to the Iowa Family & Medical Leave Act , (2) files a complaint against his/her employer for Iowa FMLA violations, or (3) participates in an investigation, proceeding, or hearing related to Iowa FMLA complaints.
If employers choose to provide paid sick leave, however, there are no requirements as to the amount of leave, the method of pay, or who is eligible for such leave. Employees eligible for paid leave must be allowed to use sick leave, for example, to care for a child with a "non-serious health condition." Iowa Code § 216.6.
Dismissal and Severance Provisions
Termination and Severance Clauses for Salaried Employees in Iowa
The general Iowa law is that all employment relationships, including all salaried employees, are "at will." That means that hte employee or employer can end the employment relationship for any reason at any time. As with any rule, there are certain exceptions to the at will employment doctrine, but they are limited and typically identified by federal laws rather than state laws. The most notable exception to the at will employment doctrine is unlawful discrimination, which typically applies to the most protected classes, such as age, sex, race, or disability.
Even though Iowa law doesn’t require a severance package be given to a laid off or terminated salaried employee, most employers provide some sort of severance package and seek to require some sort of release in order to obtain a full release and waiver from the company by the laid off or terminated employee. The non-compete agreement between the employee and the employer may also include a clause with the same type of requirement. In those situations, the employer is often required to pay the employee some amount of severance in exchange for the employee signing the release and waiver. Iowa law provides no guidance in that regard. Employers are generally free to determine the amount of severance (if any) offered to their departing salaried employees. Severance may also be tied to whether an employee is terminated or resigns.
Compliances and Your Duties as the Employer
Iowa Employers have a responsibility to comply with the Iowa labor laws governing salaried employees. When engaging a salaried employee, it is crucial to understand the rules that apply to that job title so as not to inadvertently violate any statutes. Failure to follow labor laws can lead to lost wages or damages for the employee. You don’t want your employees to believe they were to receive more, and to lose their faith in the company. That’s how you end up with bad team moral. If you have salaried employees, it is imperative to check every now and then that you are in compliance and not missing something. Especially if you have made changes to your company or staffing structure. The nature of the job must be exempt in order to be a salaried position in Iowa. The most common forms of employees that have this designation are managerial and supervisory positions. If an employee is not in a managerial position though, the company may wish to classify them as professional in order to give them a salary outside of hourly wages.
Human Resource professionals should be reviewing their classifying of employees regularly. This is a way to ensure everyone is in the correct role, duties and it can help with training. Keeping employees compliant and up to date on their trainings also shows the employees how valued they are.
Resources for Salaried Workers
The State of Iowa provides information and resources for employees through its official website. Employees can contact the Iowa Workforce Development or file an employment complaint. Questions may be routed to the Wage and Hour Division of the United States Department of Labor or the Equal Employment Opportunity Commission . A list of resources is provided below.
Iowa Workforce Development
Employ Iowa
Wage and Hour Division, U.S. Department of Labor
Equal Employment Opportunity Commission
Fortney & Weygandt, LLP