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The Fair Labor Standards Act (FLSA),also known as the federal Wage and Hour Law, requires enterprises engaged in interstate or foreign commerce and state and local governments to pay overtime of 11/2 times an employee's regular rate of pay for hours worked in excess of 40 hours in a workweek. The FLSA does not require that overtime be paid for hours worked in excess of 8 hours per day or on weekends or holidays. However, states are permitted to provide workers greater overtime protections than those offered by the FLSA.
Workweek. A workweek consists of 7 consecutive 24-hour periods. It need not coincide with the calendar week, but may begin on any day and at any hour of the day (29 CFR 778.105). For instance, some companies have adopted a workweek that runs Saturday through Friday.
Time of payment. Although overtime must be computed weekly, FLSA does not require that it be paid on a weekly basis; it requires only that overtime be paid on the next regular payday covering the period in which the overtime is earned. If the amount of overtime owed cannot be calculated until after the next regular payday, the payment must be made as soon as possible, but no later than the next regular payday after the calculation can be made.
Notices (posting). Covered employers must post notices outlining the federal minimum wage and overtime regulations. The notices must be posted conspicuously and in enough places so employees can see them as they enter and exit the workplace. Posters are available from the DOL Wage and Hour Division. Please see the national Addresses and Contacts section.
Agreements to waive overtime barred. Employees may neither waive their right to be compensated for overtime hours worked nor agree to a lower overtime rate than that required by FLSA. Therefore, even if employees have made such an agreement, they retain their right to recover overtime pay required by FLSA.
For nonexempt employees, the overtime rate is 11/2 times their regular rate of pay. The regular rate must include: the reasonable cost of meals, lodging, and other facilities provided to the employees (NOT for the benefit of the employer), nondiscretionary bonuses, on-call pay, shift differentials, and cash benefit payments from Section 125 Cafeteria Plans and other forms of compensation not specifically excluded from overtime laws by the FLSA.
There are eight narrowly construed exceptions to inclusion of payments in the regular rate:
• Gifts--the amount should not be so substantial that employees would consider it part of their wages
• Vacation, holiday or sick leave pay, and other similar payments not made as compensation for hours worked, production, or efficiency
• Discretionary payments or certain bona fide profit sharing plans or talent fees
• Bona fide fringe benefits
• Premium overtime pay
• Holiday or weekend time and 1/2 premium pay
• Extra nonovertime premium pay agreed on by employment contract or by collective bargaining agreement
• Certain stock option compensation provided under an employer plan that meets the requirements of 29 USC 207 (e)(8)
The FLSA regulations are designed to preclude an employer from setting an artificially low rate of pay on which overtime is calculated, and then providing additional compensation to the employee by other means. For any payment, the employer bears the burden of establishing that it need not be included in calculation of regular pay.
Cafeteria plans. Under the FLSA, employer contributions to “bona fide [benefits] plans” are not included in the regular rate. However, cash benefits payments to employees under a cafeteria plan must be included in the regular rate for purposes of calculating overtime.
Failure to take unpaid meal break. If an employee fails to take a 30-minute unpaid meal break during a week when the employee works more than 40 hours, the 30-minute break must be included when calculating overtime.
In general, overtime for employees not paid a straight hourly wage is figured by converting to an hourly rate as follows:
Salaried with fixed 40-hour week. The overtime rate is 11/2 times the rate per hour (weekly salary divided by 40) for all hours over 40 hours per week.
Salaried with fixed week of fewer than 40 hours. The overtime rate is 11/2 times the rate per hour (weekly salary divided by number of hours that the salary is intended to compensate) for all hours over 40 hours per week. For example, if an employee is paid a weekly salary of $350 for a 35-hour week, the rate per hour is $10. The employee must be paid $10 for hours 36 to 40 worked in a week and $15 for any additional hours worked in a week. Alternatively, the employer and employee may agree that the salary paid represents compensation for all hours up to 40 per week. In this case, no additional compensation would be owed for hours 36 to 40, and the overtime rate would be the same as for an employee with a fixed 40-hour week.
Salaried with irregular week. Employees who are paid a salary and whose hours vary from week to week receive an overtime premium calculated as follows: For each hour worked over 40, add one-half the rate per hour for that week. The rate per hour is the weekly salary divided by the actual number of hours worked in the workweek. For example, a $400 per week employee earns $8 per hour in a 50-hour week. Half this amount, $4, is the overtime premium per hour. With 10 hours of overtime, the employee receives $40 in overtime pay in addition to his or her salary.
Salary for workweek exceeding 40 hours: A fixed salary for a regular workweek longer than 40 hours does not discharge FLSA statutory obligations. For example, an employee may be hired to work a 45-hour workweek for a weekly salary of $405. In this instance, the regular rate is obtained by dividing the $405 straight-time salary by 45 hours, resulting in a regular rate of $9.00. The employee is then due additional overtime computed by multiplying the 5 overtime hours by one-half the regular rate of pay ($4.50 x 5 = $22.50).
Semimonthly salaries. The salary is multiplied by 24 and divided by 52 to obtain a weekly rate.
Monthly salaries. The salary is multiplied by 12 and divided by 52 to obtain a weekly rate.
Job or day rate. If the employee is paid a flat sum for a day's work or for doing a particular job without regard to the number of hours worked, and if he or she receives no other form of compensation for services, his or her regular rate is determined by totaling all the sums received at such day rates or job rates in the workweek and dividing by the total hours actually worked. The employee is then entitled to extra half-time pay at this rate for all hours worked in excess of 40 in the workweek.
Piecework. When an employee is employed on a piece-rate basis, his or her regular hourly rate of pay is computed by adding together his or her total earnings for the workweek and dividing by the number of hours worked in the week. For overtime work, the pieceworker is entitled to extra half-time pay at this rate for all hours worked in excess of 40 in the workweek.
Fixed sum for varying amounts of overtime: A lump sum paid for work performed during overtime hours without regard to the number of overtime hours worked does not qualify as an overtime premium even though the amount of money paid is equal to or greater than the sum owed on a per-hour basis. For example, no part of a flat sum of $180 to employees who work overtime on Sunday will qualify as an overtime premium, even though the employees' straight-time rate is $12.00 an hour and the employees always work less than 10 hours on Sunday. Similarly, where an agreement provides for 6 hours' pay at $13.00 an hour regardless of the time actually spent for work on a job performed during overtime hours, the entire $78.00 must be included in determining the employees' regular rate.
The following example demonstrates the calculation of overtime for an employee who has received other forms of compensation: An employee works 45 hours in a week and also receives a $50 bonus and $50 in lodging. His or her regular rate of pay is $12 per hour. The employer must combine all the sources of compensation: (45 hours x $12) + ($50 bonus) + ($50 lodging) = $640. This total divided by hours worked will provide the employee's true hourly rate for the week, $14.22, and time-and-a-half must be calculated from this number ($14.22 x 1.5 = $21.33). So this employee's total pay for the week would be: (40 hours x $12) + (5 hours x $21.33) + ($50 bonus) + ($50 lodging) = $686.67.
If an employee is working two separate jobs at different rates for the same employer, overtime is owed if the employee works a combined total of more than 40 hours in a workweek. The overtime should be calculated based on a regular rate of pay that is the weighted average of the rates for each job. For example, if an employee works 30 hours at $10 per hour and 20 hours at $8.00 per hour, the weighted average is $9.20 (30 hours x $10 per hours + 20 hours x $8 per hour ÷ 50 hours). The overtime pay is $46 (1/2 of $9.20 per hour x 10 hours). Alternatively, the employer and employee may agree in advance that overtime will be paid based on the rate for the type of work that was performed during the overtime hours.
Warning: Exempt salaried employees often want to work additional hours for their employer doing nonexempt work (such as data entry) to augment their salary. If this work is paid on an hourly basis, the employee may no longer be exempt and overtime will be owed including overtime for hours over 40 per week that the employee works in his or her formerly exempt job. This problem can be avoided by paying the employee a fixed salary for the second job that does not vary from week to week based on the number of hours worked. In addition, the hours worked in the second job must not be so large that the employee's “primary duty” is no longer work that qualified for the professional, administrative, or executive exemptions.
If an employee works for two completely independent employers at the same time, no overtime is owed as long as the employee works no more than 40 hours for either employer. If, however, an employee is employed jointly by two or more employers, overtime is owed if the employee's combined hours for the joint employers exceeds 40 in a workweek.
Only hours actually worked count in the overtime calculation. Therefore, holidays not worked, vacation days, sick days, etc., are not counted. The fact that an employee receives holiday pay, vacation pay, or sick pay is of no consequence for overtime purposes. The test is hours worked rather than hours paid.
Under some circumstances, time spent on call and traveling is considered work time and therefore must be compensated. If such time is work time, it must be included in the overtime calculation. The regular rate of pay must be computed on a workweek basis, and the payment for on-call time must be attributed to the particular workweek during which the employees were on call. Compensation for on-call time in a specific week may not be averaged over a 2-week period for purposes of computing the regular rate of pay. Please see the national Hours of Work, national Travel Time sections.
Please see the state Hours of Work, state Travel time sections.
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Each workweek must be considered separately in determining overtime hours, regardless of the length of the pay period. Therefore, time over 40 hours worked in one week may not be offset against time under 40 hours worked in another week (except for certain arrangements permitted for hospital and nursing home employees, firefighters, and law enforcement personnel).
There are many occupations that are exempt from FLSA's overtime pay requirements, and employers may require exempt employees to work more than 40 hours in a workweek without having to pay them a premium for overtime hours. Exemptions are narrowly construed against the employer asserting them. Consequently, employers and employees should always closely check the exact terms and conditions of an exemption in light of the employee's actual duties before assuming that the exemption might apply to the employee. The ultimate burden of supporting the actual application of an exemption rests on the employer.
Following is a list of some of the more commonly used exemptions. This list is not intended to be all-inclusive:
• Commissioned sales employees of retail or service establishments are exempt from overtime if more than half of the employee's earnings come from commissions and the employee averages at least 11/2 times the minimum wage for each hour worked.
• Drivers, driver's helpers, loaders, and mechanics are exempt from the overtime pay provisions of the FLSA if employed by a motor carrier and if the employee's duties affect the safety of operation of the vehicles in transportation of passengers or property in interstate or foreign commerce.
• Farmworkers employed on small farms.
• Salesmen and mechanics employed by automobile dealerships.
• Employees employed by certain seasonal and recreational establishments.
• Aircraft salespeople.
• Airline employees.
• Babysitters on a casual basis.
• Boat salespeople.
• Buyers of agricultural products.
• Country elevator workers (rural).
• Live-in domestic employees.
• Farm implement salespeople.
• Federal criminal investigators.
• Firefighters working in small (fewer than five firefighters) public fire departments.
• Fishermen/-women.
• Forestry employees of small (fewer than nine employees) firms.
• Fruit and vegetable transportation employees.
• Homeworkers making wreaths.
• Houseparents in nonprofit educational institutions.
• Livestock auction workers.
• Local delivery drivers and driver's helpers.
• Lumber operations employees of small (fewer than nine employees) firms.
• Motion picture theater employees.
• Newspaper deliverers.
• Newspaper employees of limited circulation newspapers.
• Police officers working in small (fewer than five officers) public police departments.
• Radio station employees in small markets.
• Railroad employees.
• Seamen on American vessels and foreign vessels.
• Sugar-processing employees.
• Switchboard operators.
• Taxicab drivers.
• Television station employees in small markets.
• Truck and trailer salespeople.
• Agricultural employees, including employees working for nonprofit or cooperative agricultural water storage or suppliers.
A few categories of workers have partial exemptions from FLSA's overtime requirements. These include:
• Certain employees of amusement and recreational establishments located in national parks and similar facilities if paid overtime for hours after 56 hours in a workweek
• Bulk or wholesale petroleum distributors if paid overtime for hours after 56 hours in a workweek
• Employees receiving literacy training for 10 hours per workweek
In addition, there are several exceptions, categorized as “white-collar jobs,” for executive, administrative, professional, outside sales, and computer employees that must meet specific criteria to qualify for the exemption. In order to qualify as exempt from the overtime pay requirements under the FLSA, an employee must pass three tests: the salary level test, salary basis test, and duties test. Please see the national Exempt Personnel section.
The DOL prohibits third-party employers, such as homecare agencies, from claiming the companionship or live-in worker exemptions. The DOL has revised the definition of “companionship services” to clarify and narrow the duties that fall within the term. As a result, many more domestic service workers are protected by FLSA’s minimum wage and overtime provisions.
According to the DOL:
• The tasks that comprise exempt companionship services are more narrowly defined than in the past.
• The exemptions for companionship services and live-in domestic service employees can be claimed only by the individual, family, or household using the services, rather than by third-party employers such as home healthcare agencies.
• The recordkeeping requirements for employers of live-in domestic service employees are revised.
The DOL states that there are no changes to regulations concerning:
• What constitutes a private home (the type of residence in which domestic service occurs);
• Whether an employment relationship exists;
• Whether an employee is jointly employed by two or more employers; or
• What constitutes compensable hours worked.
Companionship services. The term “companionship services” means the provision of fellowship and protection for an elderly person or person with an illness, injury, or disability who requires assistance in caring for himself or herself. Companionship services also includes the provision of “care” if the care is provided attendant to and in conjunction with the provision of fellowship and protection, and if it does not exceed 20 percent of the total hours worked per person each workweek. “Fellowship” means to engage the person in social, physical, and mental activities. “Protection” means to be present with the person in his or her home or to accompany the person when outside of the home to monitor the person’s safety and well-being. Examples of fellowship and protection may include conversation; reading; games; crafts; accompanying the person on walks; and going on errands, to appointments, or to social events with the person. By changing the definition of “companionship services,” the DOL has decreased the number of companions who would qualify for the minimum wage and overtime exemptions under the FLSA.
Live-in domestic service employees. Live-in domestic service workers who reside in the employer’s home permanently or for an extended period of time and are employed by an individual, family, or household are exempt from overtime pay, although they must be paid at least the federal minimum wage for all hours worked. Live-in domestic service workers who are solely or jointly employed by a third party must be paid at least the federal minimum wage and overtime pay for all hours worked by that third-party employer. These employers must maintain an accurate record of hours worked by live-in domestic service workers. The employer may require the live-in domestic service employee to record his or her hours worked and to submit the record to the employer.
Credit for lodging. The FLSA allows an employer to count the value of food, housing, or other facilities provided to employees toward wages under certain circumstances. An employer that wishes to claim the credit for lodging must ensure that the following five requirements are met:
1. Lodging must be regularly provided by the employer or similar employers.
2. The employee must voluntarily accept the lodging.
3. The lodging must be furnished in compliance with applicable federal, state, or local laws.
4. The lodging must primarily benefit the employee rather than the employer.
5. The employer must maintain accurate records of the costs incurred in the furnishing of the lodging.
Public sector employees. Public sector employees may be compensated for overtime work with time off in lieu of actual pay. For details, see Time-Off Plans/Compensatory Time in this section.
Hospitals. Overtime may be computed on a 14-day basis by agreement between the employer and the employee before performance of the work and if time and a half is paid for all hours over 8 in 1 day or 80 in 14 days (FLSA Sec. 7j). Overtime pay violations often occur when employers:
• Fail to pay overtime after 8 hours of work in a day for workers (both full-time and part-time) who are under the 8 and 80 system.
• Fail to combine hours worked in more than one department or at more than one facility when determining the total overtime hours worked.
• Pay overtime after 80 hours worked during a biweekly period rather than after 40 hours in a workweek to employees not under the 8 and 80 system.
• Fail to include in calculating overtime hours the time spent or hours worked while performing on-call assignments.
• Fail to include shift differential, bonuses, or on-call fees in calculating an employee's regular rate.
• Fail to pay overtime to nonexempt, salaried employees (e.g., clerical staff, cooks, and activities directors).
Belo contracts. For employees who normally work irregular hours and are often on their own, such as field service personnel, a special form of contract arrangement for calculating overtime, known as a Belo contract, is permitted. Such contracts must do the following:
• Specify a realistic minimum hourly rate.
• Include overtime at 11/2 times that rate for all hours over 40.
• Guarantee a weekly rate regardless of the hours worked, even if less than 40.
• Cover no more than 60 hours.
• Contain a specific agreement between the employer and employee (preferably in writing).
FLSA permits public sector employers to give employees compensatory (comp) time off in lieu of monetary overtime compensation. Comp time must be given at a rate of at least 11/2 hours for each hour of employment for which overtime compensation is required (FLSA Sec. 7(o)). Employees whose jobs involve public safety, emergency response, or seasonal activities may accrue 480 hours of compensatory time. Other employees may accrue no more than 240 hours of compensatory time. Beyond that, they must be paid money for overtime.
Private employers are not authorized under federal law to give comp time and must give monetary overtime compensation. However, a narrow exception exists for private employers that pay employees every 2 weeks or less frequently. In such cases, an employer may give an employee compensatory time off, provided that the comp time is taken in the same pay period. For example, if an employee works two hours of overtime in the first week of a 2-week pay period, an employer may give the employee 3 hours (time-and-a-half) time off in the second week of the pay period in lieu of overtime pay.
Note: Officials at DOL's Wage and Hour Division report that most time-off plans violate the law. Therefore, before implementing such plans, employers should submit them to the Division for review.
Because employees often want to participate equally in overtime assignments, the question of overtime distribution is usually detailed in the union contract or is specifically defined by work practice. Distribution of overtime is a constant source of controversy in industry, both union and nonunion.
A practical method of evenly distributing overtime is for the department supervisor to maintain a roster recording each employee's overtime work. A properly kept roster will prevent the unfair distribution of overtime and will help settle disputes between employees and the supervisor. A roster also must be set up to meet the practical needs of the specific operation. Obviously, a machine operator cannot contend for overtime with a toolmaker, because the first requirement is that the employee be qualified to do the work. Also, a distinction is often made between Saturday overtime and overtime at the end of the workday. In whatever form a roster is maintained, the simpler it is, the better it will function. Ordinarily, in maintaining a roster, an employee who declines overtime is charged with a “time at bat” and his or her name goes to the bottom of the roster.
Whether overtime is considered desirable because of the premium pay or undesirable because of the loss of free time, employees of similar skill should have equal opportunity or equal burden for overtime assignments.
Even under most union contracts, it is well-established that an employer has the right, within reasonable limits, to require employees to work overtime.
It is important to give employees adequate notice. For occasional and intermittent overtime, notice before noon is usually considered adequate. For more extended overtime, however, a full 24-hour notice is usually expected. In general, the more notice, the easier it will be for employees to plan their schedules.
In many cases, the Unemployment Compensation Department has refused to give employees unemployment compensation when they were discharged for consistently refusing to work overtime.
Note: To ensure that such discharges are “for cause,” employers should give reasonable notice of overtime, distribute overtime fairly by way of a roster, and subject the employee to progressive discipline.
If an employer allows an employee to work overtime, even though no supervisor has requested the additional work hours, the additional hours being worked are still considered as work time that must be compensated at the applicable overtime rate. An employer is considered to have allowed an employee to work overtime if it knew or should have known that an employee was on the premises working. Employers that want to bar unauthorized overtime should have an explicit policy that designates who has the authority to authorize overtime and how the authorization must be made. The policy should be strictly enforced.
An employer may provide an exempt employee with additional compensation, such as overtime, without losing the exempt status or violating the salary basis requirement if the employment arrangement also includes a guarantee of at least the minimum weekly required amount paid on a salary basis. For example, the exemption is not lost if an exempt employee who is guaranteed at least $455 each week paid on a salary basis also receives overtime compensation based on hours worked for work beyond the normal workweek. And an exempt employee guaranteed at least $455 each week paid on a salary basis may receive additional compensation of a 1 percent commission on sales. An exempt employee may also receive a percentage of the sales or profits of the employer if the employment arrangement includes, as well, a guarantee of at least $455 each week paid on a salary basis. Such additional compensation may be paid on any basis (e.g., flat sum, bonus payment, straight-time hourly amount, time and a half, or any other basis) and may include paid time off.
Last updated on June 8, 2017.
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National
The Fair Labor Standards Act (FLSA),also known as the federal Wage and Hour Law, requires enterprises engaged in interstate or foreign commerce and state and local governments to pay overtime of 11/2 times an employee's regular rate of pay for hours worked in excess of 40 hours in a workweek. The FLSA does not require that overtime be paid for hours worked in excess of 8 hours per day or on weekends or holidays. However, states are permitted to provide workers greater overtime protections than those offered by the FLSA.
Workweek. A workweek consists of 7 consecutive 24-hour periods. It need not coincide with the calendar week, but may begin on any day and at any hour of the day (29 CFR 778.105). For instance, some companies have adopted a workweek that runs Saturday through Friday.
Time of payment. Although overtime must be computed weekly, FLSA does not require that it be paid on a weekly basis; it requires only that overtime be paid on the next regular payday covering the period in which the overtime is earned. If the amount of overtime owed cannot be calculated until after the next regular payday, the payment must be made as soon as possible, but no later than the next regular payday after the calculation can be made.
Notices (posting). Covered employers must post notices outlining the federal minimum wage and overtime regulations. The notices must be posted conspicuously and in enough places so employees can see them as they enter and exit the workplace. Posters are available from the DOL Wage and Hour Division. Please see the national Addresses and Contacts section.
Agreements to waive overtime barred. Employees may neither waive their right to be compensated for overtime hours worked nor agree to a lower overtime rate than that required by FLSA. Therefore, even if employees have made such an agreement, they retain their right to recover overtime pay required by FLSA.
For nonexempt employees, the overtime rate is 11/2 times their regular rate of pay. The regular rate must include: the reasonable cost of meals, lodging, and other facilities provided to the employees (NOT for the benefit of the employer), nondiscretionary bonuses, on-call pay, shift differentials, and cash benefit payments from Section 125 Cafeteria Plans and other forms of compensation not specifically excluded from overtime laws by the FLSA.
There are eight narrowly construed exceptions to inclusion of payments in the regular rate:
• Gifts--the amount should not be so substantial that employees would consider it part of their wages
• Vacation, holiday or sick leave pay, and other similar payments not made as compensation for hours worked, production, or efficiency
• Discretionary payments or certain bona fide profit sharing plans or talent fees
• Bona fide fringe benefits
• Premium overtime pay
• Holiday or weekend time and 1/2 premium pay
• Extra nonovertime premium pay agreed on by employment contract or by collective bargaining agreement
• Certain stock option compensation provided under an employer plan that meets the requirements of 29 USC 207 (e)(8)
The FLSA regulations are designed to preclude an employer from setting an artificially low rate of pay on which overtime is calculated, and then providing additional compensation to the employee by other means. For any payment, the employer bears the burden of establishing that it need not be included in calculation of regular pay.
Cafeteria plans. Under the FLSA, employer contributions to “bona fide [benefits] plans” are not included in the regular rate. However, cash benefits payments to employees under a cafeteria plan must be included in the regular rate for purposes of calculating overtime.
Failure to take unpaid meal break. If an employee fails to take a 30-minute unpaid meal break during a week when the employee works more than 40 hours, the 30-minute break must be included when calculating overtime.
In general, overtime for employees not paid a straight hourly wage is figured by converting to an hourly rate as follows:
Salaried with fixed 40-hour week. The overtime rate is 11/2 times the rate per hour (weekly salary divided by 40) for all hours over 40 hours per week.
Salaried with fixed week of fewer than 40 hours. The overtime rate is 11/2 times the rate per hour (weekly salary divided by number of hours that the salary is intended to compensate) for all hours over 40 hours per week. For example, if an employee is paid a weekly salary of $350 for a 35-hour week, the rate per hour is $10. The employee must be paid $10 for hours 36 to 40 worked in a week and $15 for any additional hours worked in a week. Alternatively, the employer and employee may agree that the salary paid represents compensation for all hours up to 40 per week. In this case, no additional compensation would be owed for hours 36 to 40, and the overtime rate would be the same as for an employee with a fixed 40-hour week.
Salaried with irregular week. Employees who are paid a salary and whose hours vary from week to week receive an overtime premium calculated as follows: For each hour worked over 40, add one-half the rate per hour for that week. The rate per hour is the weekly salary divided by the actual number of hours worked in the workweek. For example, a $400 per week employee earns $8 per hour in a 50-hour week. Half this amount, $4, is the overtime premium per hour. With 10 hours of overtime, the employee receives $40 in overtime pay in addition to his or her salary.
Salary for workweek exceeding 40 hours: A fixed salary for a regular workweek longer than 40 hours does not discharge FLSA statutory obligations. For example, an employee may be hired to work a 45-hour workweek for a weekly salary of $405. In this instance, the regular rate is obtained by dividing the $405 straight-time salary by 45 hours, resulting in a regular rate of $9.00. The employee is then due additional overtime computed by multiplying the 5 overtime hours by one-half the regular rate of pay ($4.50 x 5 = $22.50).
Semimonthly salaries. The salary is multiplied by 24 and divided by 52 to obtain a weekly rate.
Monthly salaries. The salary is multiplied by 12 and divided by 52 to obtain a weekly rate.
Job or day rate. If the employee is paid a flat sum for a day's work or for doing a particular job without regard to the number of hours worked, and if he or she receives no other form of compensation for services, his or her regular rate is determined by totaling all the sums received at such day rates or job rates in the workweek and dividing by the total hours actually worked. The employee is then entitled to extra half-time pay at this rate for all hours worked in excess of 40 in the workweek.
Piecework. When an employee is employed on a piece-rate basis, his or her regular hourly rate of pay is computed by adding together his or her total earnings for the workweek and dividing by the number of hours worked in the week. For overtime work, the pieceworker is entitled to extra half-time pay at this rate for all hours worked in excess of 40 in the workweek.
Fixed sum for varying amounts of overtime: A lump sum paid for work performed during overtime hours without regard to the number of overtime hours worked does not qualify as an overtime premium even though the amount of money paid is equal to or greater than the sum owed on a per-hour basis. For example, no part of a flat sum of $180 to employees who work overtime on Sunday will qualify as an overtime premium, even though the employees' straight-time rate is $12.00 an hour and the employees always work less than 10 hours on Sunday. Similarly, where an agreement provides for 6 hours' pay at $13.00 an hour regardless of the time actually spent for work on a job performed during overtime hours, the entire $78.00 must be included in determining the employees' regular rate.
The following example demonstrates the calculation of overtime for an employee who has received other forms of compensation: An employee works 45 hours in a week and also receives a $50 bonus and $50 in lodging. His or her regular rate of pay is $12 per hour. The employer must combine all the sources of compensation: (45 hours x $12) + ($50 bonus) + ($50 lodging) = $640. This total divided by hours worked will provide the employee's true hourly rate for the week, $14.22, and time-and-a-half must be calculated from this number ($14.22 x 1.5 = $21.33). So this employee's total pay for the week would be: (40 hours x $12) + (5 hours x $21.33) + ($50 bonus) + ($50 lodging) = $686.67.
If an employee is working two separate jobs at different rates for the same employer, overtime is owed if the employee works a combined total of more than 40 hours in a workweek. The overtime should be calculated based on a regular rate of pay that is the weighted average of the rates for each job. For example, if an employee works 30 hours at $10 per hour and 20 hours at $8.00 per hour, the weighted average is $9.20 (30 hours x $10 per hours + 20 hours x $8 per hour ÷ 50 hours). The overtime pay is $46 (1/2 of $9.20 per hour x 10 hours). Alternatively, the employer and employee may agree in advance that overtime will be paid based on the rate for the type of work that was performed during the overtime hours.
Warning: Exempt salaried employees often want to work additional hours for their employer doing nonexempt work (such as data entry) to augment their salary. If this work is paid on an hourly basis, the employee may no longer be exempt and overtime will be owed including overtime for hours over 40 per week that the employee works in his or her formerly exempt job. This problem can be avoided by paying the employee a fixed salary for the second job that does not vary from week to week based on the number of hours worked. In addition, the hours worked in the second job must not be so large that the employee's “primary duty” is no longer work that qualified for the professional, administrative, or executive exemptions.
If an employee works for two completely independent employers at the same time, no overtime is owed as long as the employee works no more than 40 hours for either employer. If, however, an employee is employed jointly by two or more employers, overtime is owed if the employee's combined hours for the joint employers exceeds 40 in a workweek.
Only hours actually worked count in the overtime calculation. Therefore, holidays not worked, vacation days, sick days, etc., are not counted. The fact that an employee receives holiday pay, vacation pay, or sick pay is of no consequence for overtime purposes. The test is hours worked rather than hours paid.
Under some circumstances, time spent on call and traveling is considered work time and therefore must be compensated. If such time is work time, it must be included in the overtime calculation. The regular rate of pay must be computed on a workweek basis, and the payment for on-call time must be attributed to the particular workweek during which the employees were on call. Compensation for on-call time in a specific week may not be averaged over a 2-week period for purposes of computing the regular rate of pay. Please see the national Hours of Work, national Travel Time sections.
Please see the state Hours of Work, state Travel time sections.
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Each workweek must be considered separately in determining overtime hours, regardless of the length of the pay period. Therefore, time over 40 hours worked in one week may not be offset against time under 40 hours worked in another week (except for certain arrangements permitted for hospital and nursing home employees, firefighters, and law enforcement personnel).
There are many occupations that are exempt from FLSA's overtime pay requirements, and employers may require exempt employees to work more than 40 hours in a workweek without having to pay them a premium for overtime hours. Exemptions are narrowly construed against the employer asserting them. Consequently, employers and employees should always closely check the exact terms and conditions of an exemption in light of the employee's actual duties before assuming that the exemption might apply to the employee. The ultimate burden of supporting the actual application of an exemption rests on the employer.
Following is a list of some of the more commonly used exemptions. This list is not intended to be all-inclusive:
• Commissioned sales employees of retail or service establishments are exempt from overtime if more than half of the employee's earnings come from commissions and the employee averages at least 11/2 times the minimum wage for each hour worked.
• Drivers, driver's helpers, loaders, and mechanics are exempt from the overtime pay provisions of the FLSA if employed by a motor carrier and if the employee's duties affect the safety of operation of the vehicles in transportation of passengers or property in interstate or foreign commerce.
• Farmworkers employed on small farms.
• Salesmen and mechanics employed by automobile dealerships.
• Employees employed by certain seasonal and recreational establishments.
• Aircraft salespeople.
• Airline employees.
• Babysitters on a casual basis.
• Boat salespeople.
• Buyers of agricultural products.
• Country elevator workers (rural).
• Live-in domestic employees.
• Farm implement salespeople.
• Federal criminal investigators.
• Firefighters working in small (fewer than five firefighters) public fire departments.
• Fishermen/-women.
• Forestry employees of small (fewer than nine employees) firms.
• Fruit and vegetable transportation employees.
• Homeworkers making wreaths.
• Houseparents in nonprofit educational institutions.
• Livestock auction workers.
• Local delivery drivers and driver's helpers.
• Lumber operations employees of small (fewer than nine employees) firms.
• Motion picture theater employees.
• Newspaper deliverers.
• Newspaper employees of limited circulation newspapers.
• Police officers working in small (fewer than five officers) public police departments.
• Radio station employees in small markets.
• Railroad employees.
• Seamen on American vessels and foreign vessels.
• Sugar-processing employees.
• Switchboard operators.
• Taxicab drivers.
• Television station employees in small markets.
• Truck and trailer salespeople.
• Agricultural employees, including employees working for nonprofit or cooperative agricultural water storage or suppliers.
A few categories of workers have partial exemptions from FLSA's overtime requirements. These include:
• Certain employees of amusement and recreational establishments located in national parks and similar facilities if paid overtime for hours after 56 hours in a workweek
• Bulk or wholesale petroleum distributors if paid overtime for hours after 56 hours in a workweek
• Employees receiving literacy training for 10 hours per workweek
In addition, there are several exceptions, categorized as “white-collar jobs,” for executive, administrative, professional, outside sales, and computer employees that must meet specific criteria to qualify for the exemption. In order to qualify as exempt from the overtime pay requirements under the FLSA, an employee must pass three tests: the salary level test, salary basis test, and duties test. Please see the national Exempt Personnel section.
The DOL prohibits third-party employers, such as homecare agencies, from claiming the companionship or live-in worker exemptions. The DOL has revised the definition of “companionship services” to clarify and narrow the duties that fall within the term. As a result, many more domestic service workers are protected by FLSA’s minimum wage and overtime provisions.
According to the DOL:
• The tasks that comprise exempt companionship services are more narrowly defined than in the past.
• The exemptions for companionship services and live-in domestic service employees can be claimed only by the individual, family, or household using the services, rather than by third-party employers such as home healthcare agencies.
• The recordkeeping requirements for employers of live-in domestic service employees are revised.
The DOL states that there are no changes to regulations concerning:
• What constitutes a private home (the type of residence in which domestic service occurs);
• Whether an employment relationship exists;
• Whether an employee is jointly employed by two or more employers; or
• What constitutes compensable hours worked.
Companionship services. The term “companionship services” means the provision of fellowship and protection for an elderly person or person with an illness, injury, or disability who requires assistance in caring for himself or herself. Companionship services also includes the provision of “care” if the care is provided attendant to and in conjunction with the provision of fellowship and protection, and if it does not exceed 20 percent of the total hours worked per person each workweek. “Fellowship” means to engage the person in social, physical, and mental activities. “Protection” means to be present with the person in his or her home or to accompany the person when outside of the home to monitor the person’s safety and well-being. Examples of fellowship and protection may include conversation; reading; games; crafts; accompanying the person on walks; and going on errands, to appointments, or to social events with the person. By changing the definition of “companionship services,” the DOL has decreased the number of companions who would qualify for the minimum wage and overtime exemptions under the FLSA.
Live-in domestic service employees. Live-in domestic service workers who reside in the employer’s home permanently or for an extended period of time and are employed by an individual, family, or household are exempt from overtime pay, although they must be paid at least the federal minimum wage for all hours worked. Live-in domestic service workers who are solely or jointly employed by a third party must be paid at least the federal minimum wage and overtime pay for all hours worked by that third-party employer. These employers must maintain an accurate record of hours worked by live-in domestic service workers. The employer may require the live-in domestic service employee to record his or her hours worked and to submit the record to the employer.
Credit for lodging. The FLSA allows an employer to count the value of food, housing, or other facilities provided to employees toward wages under certain circumstances. An employer that wishes to claim the credit for lodging must ensure that the following five requirements are met:
1. Lodging must be regularly provided by the employer or similar employers.
2. The employee must voluntarily accept the lodging.
3. The lodging must be furnished in compliance with applicable federal, state, or local laws.
4. The lodging must primarily benefit the employee rather than the employer.
5. The employer must maintain accurate records of the costs incurred in the furnishing of the lodging.
Public sector employees. Public sector employees may be compensated for overtime work with time off in lieu of actual pay. For details, see Time-Off Plans/Compensatory Time in this section.
Hospitals. Overtime may be computed on a 14-day basis by agreement between the employer and the employee before performance of the work and if time and a half is paid for all hours over 8 in 1 day or 80 in 14 days (FLSA Sec. 7j). Overtime pay violations often occur when employers:
• Fail to pay overtime after 8 hours of work in a day for workers (both full-time and part-time) who are under the 8 and 80 system.
• Fail to combine hours worked in more than one department or at more than one facility when determining the total overtime hours worked.
• Pay overtime after 80 hours worked during a biweekly period rather than after 40 hours in a workweek to employees not under the 8 and 80 system.
• Fail to include in calculating overtime hours the time spent or hours worked while performing on-call assignments.
• Fail to include shift differential, bonuses, or on-call fees in calculating an employee's regular rate.
• Fail to pay overtime to nonexempt, salaried employees (e.g., clerical staff, cooks, and activities directors).
Belo contracts. For employees who normally work irregular hours and are often on their own, such as field service personnel, a special form of contract arrangement for calculating overtime, known as a Belo contract, is permitted. Such contracts must do the following:
• Specify a realistic minimum hourly rate.
• Include overtime at 11/2 times that rate for all hours over 40.
• Guarantee a weekly rate regardless of the hours worked, even if less than 40.
• Cover no more than 60 hours.
• Contain a specific agreement between the employer and employee (preferably in writing).
FLSA permits public sector employers to give employees compensatory (comp) time off in lieu of monetary overtime compensation. Comp time must be given at a rate of at least 11/2 hours for each hour of employment for which overtime compensation is required (FLSA Sec. 7(o)). Employees whose jobs involve public safety, emergency response, or seasonal activities may accrue 480 hours of compensatory time. Other employees may accrue no more than 240 hours of compensatory time. Beyond that, they must be paid money for overtime.
Private employers are not authorized under federal law to give comp time and must give monetary overtime compensation. However, a narrow exception exists for private employers that pay employees every 2 weeks or less frequently. In such cases, an employer may give an employee compensatory time off, provided that the comp time is taken in the same pay period. For example, if an employee works two hours of overtime in the first week of a 2-week pay period, an employer may give the employee 3 hours (time-and-a-half) time off in the second week of the pay period in lieu of overtime pay.
Note: Officials at DOL's Wage and Hour Division report that most time-off plans violate the law. Therefore, before implementing such plans, employers should submit them to the Division for review.
Because employees often want to participate equally in overtime assignments, the question of overtime distribution is usually detailed in the union contract or is specifically defined by work practice. Distribution of overtime is a constant source of controversy in industry, both union and nonunion.
A practical method of evenly distributing overtime is for the department supervisor to maintain a roster recording each employee's overtime work. A properly kept roster will prevent the unfair distribution of overtime and will help settle disputes between employees and the supervisor. A roster also must be set up to meet the practical needs of the specific operation. Obviously, a machine operator cannot contend for overtime with a toolmaker, because the first requirement is that the employee be qualified to do the work. Also, a distinction is often made between Saturday overtime and overtime at the end of the workday. In whatever form a roster is maintained, the simpler it is, the better it will function. Ordinarily, in maintaining a roster, an employee who declines overtime is charged with a “time at bat” and his or her name goes to the bottom of the roster.
Whether overtime is considered desirable because of the premium pay or undesirable because of the loss of free time, employees of similar skill should have equal opportunity or equal burden for overtime assignments.
Even under most union contracts, it is well-established that an employer has the right, within reasonable limits, to require employees to work overtime.
It is important to give employees adequate notice. For occasional and intermittent overtime, notice before noon is usually considered adequate. For more extended overtime, however, a full 24-hour notice is usually expected. In general, the more notice, the easier it will be for employees to plan their schedules.
In many cases, the Unemployment Compensation Department has refused to give employees unemployment compensation when they were discharged for consistently refusing to work overtime.
Note: To ensure that such discharges are “for cause,” employers should give reasonable notice of overtime, distribute overtime fairly by way of a roster, and subject the employee to progressive discipline.
If an employer allows an employee to work overtime, even though no supervisor has requested the additional work hours, the additional hours being worked are still considered as work time that must be compensated at the applicable overtime rate. An employer is considered to have allowed an employee to work overtime if it knew or should have known that an employee was on the premises working. Employers that want to bar unauthorized overtime should have an explicit policy that designates who has the authority to authorize overtime and how the authorization must be made. The policy should be strictly enforced.
An employer may provide an exempt employee with additional compensation, such as overtime, without losing the exempt status or violating the salary basis requirement if the employment arrangement also includes a guarantee of at least the minimum weekly required amount paid on a salary basis. For example, the exemption is not lost if an exempt employee who is guaranteed at least $455 each week paid on a salary basis also receives overtime compensation based on hours worked for work beyond the normal workweek. And an exempt employee guaranteed at least $455 each week paid on a salary basis may receive additional compensation of a 1 percent commission on sales. An exempt employee may also receive a percentage of the sales or profits of the employer if the employment arrangement includes, as well, a guarantee of at least $455 each week paid on a salary basis. Such additional compensation may be paid on any basis (e.g., flat sum, bonus payment, straight-time hourly amount, time and a half, or any other basis) and may include paid time off.
Last updated on June 8, 2017.
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