5 step overview of overtime laws
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5 step overview of overtime laws

The Fair Labor Standards Act (FLSA) is a set of federal laws defining minimum wage and other basic employee time and pay requirements. It also sets the standards for overtime pay.

Under the FLSA, non-exempt, hourly employees are entitled to receive one and one-half times their regular rate of pay for all hours worked in excess of 40 in each workweek.

 

How is Overtime Defined?

  1. Overtime must be calculated
    on a workweek basis.

  2. Many employers pay employees biweekly, semimonthly or monthly. Consequently, employers often calculate overtime based upon hours worked in a pay period.

    Some employers, for example, pay employees overtime only if they work in excess of 80 hours in a two-week pay period. This practice is illegal under the FLSA , regardless of whether an employee requests it or signs a waiver.

    If an employee works 45 hours in the first week and 35 hours in the second week, the employee is entitled to five hours of overtime compensation for the first week, even though the average of both weeks is 40 hours.

    Make sure your attendance tracking forms or other attendance monitoring system is set to compute pay per week rather than per pay period to avoid this issue. (Note that there are exceptions for certain medical professionals and public-sector workers.)

    Note: Some states have daily overtime laws

    In some states, overtime is also computed by day. Where there are daily overtime laws , if the employee worked over 8 hours per day, the employee would be entitled to overtime for all hours beyond the first eight each day, regardless of how many hours worked in a week.

    If they also work over 40 hours in the week, additional overtime would accrue. Check your attendance tracking tools to make sure they are set to work with your state laws in computing overtime, if different overtime rules apply.


  3. Employees must be paid overtime on
    their regular rate, not their base rate.


  4. Many employers make the mistake of paying overtime based on an employee’s base rate rather than the regular rate. If other forms of pay, such as nondiscretionary bonuses and shift differentials, raise the employee’s regular rate, the overtime rate must be raised. There are forms of compensation that do not increase the regular rate. These include vacation pay, sick pay, holiday pay, entirely discretionary bonuses, and health and welfare benefits.

  5. “Comp Time” cannot offset overtime
    pay requirements


  6. Compensatory time or “comp time” generally is not permitted for non-exempt/hourly employees – even if they request it. Employers may not consider an employee’s hours in a different workweek, or the average of one or more workweeks, to avoid reaching the 40-hour threshold for paying overtime. (There are some exceptions for government employees and certain healthcare workers.)

  7. Unauthorized overtime is still overtime


  8. You should make sure your employee attendance policy states that all overtime must be pre-approved by management. However, if an employee works overtime without approval, you are still required to pay him or her for the work performed. You may discipline an employee for unauthorized overtime, but you may not adjust his/her time records or refuse to pay for the hours.

  9. Off-the-Clock Work is still work


  10. Many employers mistakenly believe that an hourly employee may volunteer to work “off the clock,” or that work taken home is not compensable. Although it may defy logic, employers are obligated to pay non-exempt employees for all time worked, even under these circumstances. As a general rule, if a non-exempt employee performs any work on the employer’s behalf, the employee must be compensated for his/her time – regardless of whether the employer expected, requested or authorized the specific number of hours worked.

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