Everything Employers Need to Know About Overtime Hours
Labor laws can be quite complex but are very important to understand. Here's everything employers should know about overtime laws and who is eligible for overtime pay.
It's very important for employers to be aware of and abide by any and all labor laws that they are subject to including any local, state, and federal laws. These legal regulations are meant to protect employees from being unfairly exploited. If negligent or failing to comply, employers may find themselves in some serious hot water.
Overtime regulations, in particular, can be confusing for employers. A stream of questions arise- Who is eligible for overtime pay? When do overtime hours start? How do you calculate overtime pay?
Federal and state labor laws require most employers to pay overtime for worked excess hours of the employee's normal hourly wage plus 50% per overtime hour.
However, there are a number of exceptions to these laws. Not all employees are eligible for this increased pay rate.
With that in mind, employers should take the time to learn the ins and outs of overtime laws and how they may impact their business.
What's the Difference- Daily vs. Weekly OT
A common point of confusion regarding overtime pay is whether overtime starts after an employee works more than eight hours in a day or after working 40 hours in a week.
Federal labor laws, and most state laws, require employers to pay non-exempt employees overtime for every hour after working 40 hours in a single week.
In these cases, it doesn't matter how many hours an employee works in a day. For instance, if an employee works three 10-hour shifts in a row and has the rest of the week off, that employee will not receive overtime pay as only 30 hours of work was completed.
This isn't the case in every state. In California, for example, nonexempt employees must be paid overtime for every hour after working 8 hours in a single day. Using the example from above, the employee would be entitled to 2 hours of overtime pay for each of the three 10-hour shifts.
Similar to how the wage rate and minimum wage varies from state-to-state, some of these regulations only apply to certain states. This is why it's important for employers to understand whether or not their state has standards for daily overtime.
Employees Who are Entitled to OT
Some employees are exempt from overtime laws and regardless of overtime pay, would not qualify for OT.
Businesses that are covered by either the Fair Labor Standards Act (FLSA) or their state's overtime laws must pay all employees overtime unless they fall under certain exceptions.
Workers that are exempt from OT laws include-
- Salaried executive, administrative, and professional employees
- Independent contractors, or freelancers
- Employees that work at seasonal amusement or recreational businesses
- Employees of organized camps or religious or nonprofit educational conference centers that operate for fewer than seven months a year
- Volunteer workers
- Salespeople that typically work away from their employer's place of business
- Computer specialists who earn at least $27.63 per hour
- Employees of certain small newspapers and switchboard operators of small telephone companies
- Employees who work on small farms
- Newspaper delivery employees
- Employees engaged in fishing operations
- Seamen employed on foreign vessels
- Criminal investigators
- Casual babysitters
As mentioned above, salaried executive, administrative, and professional employees are not entitled to overtime pay. This exception can be confusing to some, though, as it can be difficult to determine which workers fall under one of these categories.
According to the FLSA, to be included in this exemption, employees must be salaried and job duties must require the use of discretion and independent judgment.
To qualify for this exemption, salaried employees must be paid a minimum of $684 per week and must be paid the same salary every week regardless of the number of hours or amount of work done.
If an employee's pay is docked, such as for leaving work early, then the employee is not paid on a salaried basis and not included in overtime laws. There are some exceptions to this, though, such as an employee's pay being docked for missing a full day of work.
Job Duty Requirements
Aside from salary requirements, employees must perform certain job duties to be exempt from overtime pay.
- Executive Employees- An executive employee's primary duty must be to manage either the employer's enterprise or a division of the enterprise. The employee must also regularly supervise at least two full-time employees and must have the authority to hire and fire workers or have significant input in this process.
- Administrative Employees- Administrative employees are those whose job duties are directly related to the management of the employer or its customers. They must also be required to use discretion and independent judgment regarding significant issues.
- Professional Employees- This exemption applies to employees that perform work that requires advanced, specialized knowledge in science or learning, work that requires advanced study, or work that requires originality and creativity.
Common Questions About Overtime Answered
Overtime laws can be fairly complex and invite a variety of important questions.
Here are a few of the most commonly-asked questions regarding federal and state overtime laws.
What is Overtime?
Overtime includes any hours worked beyond an employee's regularly scheduled hours.
Generally, this means any hours worked beyond 40 hours in a week or 8 hours in a day, depending on the state.
How do You Calculate OT Pay?
Employees that work overtime hours must be paid time and half (i.e. 1.5x) for every overtime hour. So, to calculate an employee's overtime rate, simply multiply their standard hourly wage by 1.5.
For example, if an employee's regular pay is $20 per hour and works 48 hours in a workweek, that
is entitled to 5 hours of overtime pay.
To determine the overtime rate, multiply the regular rate, 20/ hour, by 1.5-
$20 x 1.5 = $30
Then, multiply the overtime rate by the number of overtime hours that were worked-
$30 x 5 = $150
Does OT Start After 8 or 40 Hours?
Per federal law, overtime refers to hours worked beyond 40 hours in a single workweek at which point the rate of pay would increase from the employee's regular rate.
However, certain states, like California, require employers to pay overtime to employees that work more than eight hours in a single day.
To fully understand what their obligations are, employers should familiarize themselves with their state's specific overtime laws.
Do Salaried Employees Qualify?
Many salaried employees are exempt from OT laws, but some may still be entitled to overtime pay.
Salaried employees must earn at least $47,476 to be exempt from overtime laws and must be paid consistently at set intervals. They must also be considered an administrative, executive, or professional employee.