The Federal Fair Labor Standards Act (FLSA) requires that employers pay all non-exempt employees at a rate of at least one and one half times their regular rate of pay for each hour worked over 40 hours in a workweek. While this may seem straight forward, there are many misconceptions regarding when overtime is to be paid and to which employees. Below is a list of five of the top myths associated with overtime pay.
#1 – Salary employees do not receive overtime pay – INCORRECT!!
While all exempt employees must be paid on a salary basis, not all salary employees are exempt from overtime. In order to be classified as exempt, an employee must be paid a salary of at least $455 per week and must meet certain tests regarding job duties to qualify for exemption from minimum wage and overtime. For more information about the job duties tests, the Department of Labor has created tip sheets about the classes of exempt employees. (Links to these fact sheets are provided at the bottom of this post!) Employees who do not meet the job duties test or the minimum salary of $455 per week can still be paid on a salary basis but the salary must be equivalent to at least minimum wage for each hour worked and overtime hours must be paid at a rate of at least one and one half times the regular rate of pay.
#2 – You can give employees paid time off (or “comp time”) in lieu of overtime pay – INCORRECT!!
The FLSA does not permit providing employees with “comp time” or paid time off at another time instead of providing overtime pay. For example, if an employee works 48 hours this week you cannot pay them for just 40 hours at their regular rate of pay and then add 8 hours to a paid time off bank to be used at another time. The employee must be paid for 40 hours at their regular rate of pay and 8 hours at their overtime pay rate.
#3 – You can average hours over two or more weeks when determining overtime hours – INCORRECT!!
The FLSA states that all non-exempt employees must receive overtime pay for hours worked over 40 in a workweek. This is a predetermined 7 day period (determined by the employer but should be a consistent 7 day period such as Sunday – Saturday or Monday-Sunday). If you are paid on a biweekly basis, this does not mean that hours over 80 in the biweekly pay period should be paid at the overtime rate – each week should be calculated individually regardless of the payroll frequency or the length of the payroll pay period.
#4 – Employers are not responsible for paying employees who worked “unauthorized” overtime – INCORRECT!!
Employees must be paid for ALL hours worked. This means that while you can have a policy that does not allow employees to work overtime without approval from a manager, if an employee does work overtime hours that were not authorized you must still pay them for the time worked. The employee can (and should) be disciplined for not following company policy. If an employee repeatedly violates the policy even after disciplinary action they may be terminated (treated the same as other employees and other company violations).
#5 – Overtime laws are the same everywhere – INCORRECT!!
The federal FLSA requires overtime pay for hours worked over 40 in a workweek, but some states and/or cities have their own overtime laws that have additional requirements. For example, in California non-exempt employees who work more than 8 hours in a workday should be paid at a rate of one and one half times their regular pay for the hours worked over 8 in a workday (even if the total for the workweek is less than 40 hours). California has additional requirements related to double time and days of work. Make sure to familiarize yourself with the overtime laws that apply to your employees in each of the cities and states that you have employees working.
Fact Sheets from the Department of Labor: