What You Must Know About Overtime Pay

Patrick McGuiness
Patrick McGuiness

There’s no question that overtime pay is expensive, so knowing when and how it must be paid could save your company money. The Federal Law that governs overtime is the Fair Labor Standards Act (FLSA). Each state also has their own rules that cover overtime, but generally speaking, the FLSA is the body of law that you must follow. Under the FLSA, laborers such as landscapers, mowers, and machinery operators, must be paid overtime by the businesses that employ them.

Employees must be paid overtime compensation when applicable, but what about independent contractors, subcontractors and salaried workers? These workers don’t need to be paid overtime pay; however they must be properly classified in order to avoid overtime payments to them.

Simply labeling a worker a subcontractor for the purpose of avoiding overtime isn’t sufficient. The subcontractor must qualify under the Department of Labor’s seven-factor test in order for the classification to be valid.

Salaried employees don’t need to be paid overtime, but once again, the classification as a salaried employee must be a valid one. Any worker that performs manual labor cannot be paid salary for the purposes of avoiding overtime payments by the company.

Employees must be paid time and one half pay for all time beyond 40 hours in a work week. The time and one half rate is based upon the workers regular hourly wage. If a worker is improperly classified as a salaried employee, the hourly rate will be determined by dividing the weekly salary by 40 hours. Time and one half rate will be due on the calculated base rate.

A work week is the seven consecutive day period which the company has decided to have as its work week. The work week does not need to be Sunday through Saturday, it can be Tuesday through Monday, Thursday through Wednesday, or any other regular seven consecutive day period. The company can change the work week from time to time for business reasons, provided the change is not made in an attempt to prevent paying workers overtime.

Pay period hours cannot be averaged when determining if overtime pay is due. So, if an employee works thirty hours in week one and fifty hours in week two, the company must pay them ten hours of overtime in the second week of work.

The FLSA does not require any premium holiday pay, vacation pay, weekend pay or night pay. Premiums for work during these times is something a company can choose to pay employees as an incentive, or which can be negotiated by a group of employees.

The FLSA also does not require double-time pay ever.

The FLSA does not address part-time versus full-time work. This is a matter that a company can make designations about, but regardless of designation, employees who work more than 40 hours in a work week must be paid overtime at time and one half rate or greater. There is no limit on the total number of hours an employee can work, so long as overtime is properly paid after 40 hours.

For a fact sheet on overtime pay requirements of the FLSA, click here.

For a fact sheet on blue collar workers and exemptions, click here.