Overtime Pay & the FLSA Explained
Let's start with an (allegedly) simple question: what is overtime and who gets it?
The Fair Labor Standards Act (FLSA) defines overtime as pay for hours worked in excess of 40 in a workweek of at least one and one-half times the regular rate of pay. An employer who requires or permits an employee to work overtime is generally required to pay the employee overtime pay for such work. The FLSA does not require overtime pay for work on Saturdays, Sundays, holidays, or regular days of rest, unless overtime hours are worked on such days. The FLSA also does not require extra pay for weekend or night work or double time pay. Extra pay for working weekends or nights is a matter of agreement between the employer and the employee (or the employee's representative). Again, the FLSA requires overtime for non-exempt employees who physically work in excess of 40 hours in a work-week.
Still have questions regarding the FLSA and overtime pay? Don't worry! Here are answers to the top 10 overtime questions we receive.
1. What is considered a "workweek"? A workweek defined by the FLSA is a fixed and regularly recurring period of 168 hours (24/7 period). The workweek does not have to be a calendar week and it may begin on any day of the week at any time of day. Different employees or groups of employees may have different workweeks established.
2. What is the standard definition of "overtime"? A workweek is just that – a 7 day, 24 hour per day, consecutive period of time. The hours worked in a particular week determine if overtime is due. An average of the hours over two or more weeks is not permitted. Overtime pay earned in a particular workweek must be paid as part of the regular payday for the pay period in which overtime occurred.
3. Do I have other options? Yes – employers have FLSA compliant options other than paying overtime. For example, an employer may rearrange schedules so that an employee works four 10-hour days and then has three days off per week. Employers may also allow for an employee to take the time off within the same pay period as the overtime worked.
4. What is the difference between exempt and non-exempt employees? If you are a non-exempt employee, then you are "not exempt" from the provisions and protections of the FLSA and are thus eligible for overtime pay and minimum wage protections. If you are an exempt employee, then you are "exempt" from and are not covered by the provisions of the FLSA and have no guarantees of overtime pay or minimum wage. Simple as that.
5. How do I determine if my employees are exempt or non-exempt? Ok – that's a harder question. Department of Labor Wage and Hour Division regulations require that an employee be paid on a salary basis and perform certain duties in order to be classified as exempt. This means an employee must generally receive his salary for any week in which he performs any work, without regard to the number of days or hours worked. Employers should also look at the job duties, not the job title, of an employee to determine whether an exempt status applies.
6. If a non-exempt employee works overtime that is not authorized, do I still have to pay them the overtime? Yes – non-exempt employees must always be paid for all hours worked. However, you can include a policy or clause in your handbook stating that all overtime must be authorized in advance by a supervisor. If unauthorized overtime occurs, then you are able to approach the situation as a disciplinary issue and the employee may be issued a written warning, for example.
7. Do I have to pay overtime if an employee works more than 8 hours in a day? Only if your employee works in Alaska, California, Nevada, or Puerto Rico. In these states/territories, employers must pay overtime for all hours over 8 in a workday. In Colorado, employers must pay overtime when an employee works more than 12 hours in a day. In all other states, overtime must only be paid when a non-exempt employee works more than 40 hours in a workweek.
8. Do I have to pay overtime on vacation or holiday hours? Overtime is only required when an employee actually works more than 40 hours in a week. For example, an employee works 40 hours and receives 8 hours of vacation pay in a workweek. He would be paid for 48 hours but would not receive any overtime pay.
9. My employees want to volunteer their time to work on a project or do some additional work. Do I have to pay them overtime to perform this work? Generally, even if employees "volunteer" to perform work without pay, the employer is still obligated to pay the employee for all hours he performs work for the employer. Managers should be diligent about not permitting any employees to perform ANY work "off the clock", as this is an enormous liability for employers. For non-profit organizations, this is essential to recognize, since an employee of the organization generally should not also be treated as a volunteer of the organization.
10. If I just pay my workers as independent contractors instead of employees, I can avoid overtime, right? Wrong! The IRS and the Department of Labor closely govern which individuals may be classified as employees or independent contractors. It is essential to carefully review the guidelines for classification prior to engaging an individual as an independent contractor. There can be significant financial consequences for improper classification that can include paying back taxes to the IRS and fines and penalties related to wages and benefits.