If an employee works more than 40 hours in a typical work week, are you required to pay them overtime? Unfortunately, the answer is far from cut and dry – and yet the stakes are so high because failure to pay that employee their time-and-a-half can leave you on the hook for paying a whole lot more!
According to the US Department of Labor (DOL), employees covered by the Fair Labor Standards Act (FLSA) “must receive overtime pay for hours worked in excess of 40 in a work week.” However, overtime can only be earned by so-called non-exempt workers.
So, who exactly falls under this non-exempt status? Well, to answer this, it’s almost easier to look at who’s exempt first. Exempt folks fall into the following categories, according to the FLSA:
- Executive
- Professional
- Administrative
- Computer
- Outside Sales
Now if you’re thinking “well, that’s pretty broad!” you’re correct, they have done this on purpose to encompass as many job types as possible. To add an extra layer of complexity, they note that it’s the tasks of the job, not the title, that determines whether you are exempt or not. A good rule of thumb for this facet that we found was that non-exempt typically tends to be your so-called “blue collar workers,” meaning those who perform routine and repetitive tasks. This may include skilled tradesman, construction workers, technicians, landscapers and custodians, among others. But the exempt vs non-exempt rules don’t stop there.
According to the DOL, you are subject to FLSA rules if your company has $500,000 or more in annual sales or if you draw in less than that but participate in “interstate commerce,” meaning that you conduct business across multiple states. For example, Abel HR is based in New Jersey, but we have clients in almost every state, so we therefore must comply with FLSA rules. You are also thought to engage in interstate commerce if you ship or receive goods from other companies, send mail out of state, or even make business calls to folks who aren’t in your home state. Essentially, it’s pretty difficult to dodge the rules based on the interstate commerce, but if you think you might not have to pay, call your state labor department because there might be some obscure local laws that leave you on the hook!
Another important note when calculating overtime is understanding where a week starts and ends. The DOL states that an employee’s workweek is a fixed and regularly recurring period of 168 hours, which equates to seven consecutive 24-hour periods. It doesn’t matter if those days run Tuesday to Tuesday, as long as it’s seven days in a row. Further, it should be noted that if your employees work erratic schedules, with some weeks heavier than others, you can’t average their hours to get out of paying overtime. Again, the rule focuses on those seven consecutive days alone.
Now, as to what you have to pay, the DOL says that you must pay your workers a minimum of one and a half times their regular rate of pay. So, if your employee makes $15 an hour, their overtime pay would be $22.50 per hour. It should be noted that you don’t have to pay overtime pay for work completed on weekends, holidays, or “regular days or rest,” unless those hours worked constitute overtime. However, it should be noted that several states, such as California, have rules about overtime being paid based on the daily volume that an employee works. For example, if an employee works a 12-hour day, they would be entitled to four hours of overtime pay because they worked beyond the expected eight-hour workday.
Still scratching your head over who’s exempt and who’s due for some overtime in your company? Give us a call at 800-400-1968 and we’ll be happy to walk you through the process.
