From payroll to employee rights, the United States Department of Labor (DOL) makes rules and laws for employers to follow. These rules are designed to protect employees by assuring workplaces are safe and workers are appropriately compensated in accordance with the law.
FLSA overtime rules and labor laws dictate how employers should compensate eligible employees who work overtime hours. Let’s discuss overtime laws.
What Is the Fair Labor Standards Act?
The Fair Labor Standards Act (FLSA) is an employment law imposed by the federal government that establishes a federal minimum wage for all employees in the United States. It also defines when overtime compensation must be provided to employees who are scheduled to work beyond normal full-time hours. The FLSA also defines the correct method for computing overtime compensation.
The Fair Labor Standards Act only defines the bare minimum expectations of employers. Employers have the freedom to set their own starting hourly rate and to set their own overtime, weekend, or holiday pay incentives as long as they are not below the threshold set by the FLSA.
Some employers take a bare-bones approach and follow the FLSA to the letter, and other employers who want to remain competitive will exceed the minimums defined in the act.
What Are the FLSA Overtime Rules?
FLSA dictates that overtime work is any work an employee performs beyond 40 work hours in a workweek. FLSA defines a workweek as any seven consecutive 24-hour periods, which includes weekends.
If an employee works 41 of 168 total hours a week, the 41st hour is considered an overtime hour. Additional hours must be paid at an overtime rate.
FLSA does not make special provisions concerning employees’ normal days off, weekends, or holidays. Every single day of the year is held to the same standard for overtime calculations.
Employees who work overtime must be paid at least “time and a half” for each overtime hour worked. Time and a half is the employee’s normal hourly salary plus 50 percent. An employee whose regular rate of pay is $20 an hour would be paid $30 an hour for each hour beyond 40 hours they work in one week.
Overtime rules only apply to employees and not independent contractors, independent professionals, or subcontractors. Some categories of employees are exempt from receiving overtime but may be granted overtime at the voluntary discretion of an employer.
Is There a Limit to the Number of Overtime Hours an Employee Can Work?
There is no legal limit for the amount of overtime hours an adult employee can work. Child labor laws prohibit employees under 16 years of age from working overtime. Employees can technically remain on the clock 24 hours a day, seven days a week, if their employer permits them to be.
Overtime will never max out or stop at a certain amount of hours worked. If your non-exempt employee works 70 hours a week, 30 hours will be considered overtime hours.
Can Employers Set Their Own Overtime Rate?
The FLSA overtime pay requirements only mandate a minimum overtime rate. If you provide a higher rate per hours worked or premium pay for overtime on special occasions, you have full freedom to do so.
Premium pay and special overtime rates for weekends and holidays may incentivize employees to increase their number of hours during periods of time when it’s hard to fill the schedule.
What Types of Workers Are Exempt From Overtime?
Salaried employees who make a minimum of $455 per week and fulfill job duties considered exempt are exempt from overtime. Almost every professional who makes over $100,000 is exempt from overtime provisions due to their status as a highly compensated employee.
The three job categories for overtime exemption are administrative, executive, and professional employees. Determining if a particular employee’s role would exempt them from overtime may not always be intuitive. The Department of Labor provides further guidance for which types of careers fall under exempt umbrellas.
Exempt job roles in the administrative category include office work, human resources, public relations, advertising, tax compliance, and business compliance. Exempt executives include members of management, which would be anyone within a company who has the power to hire or terminate an employee.
Exempt professionals can be more difficult to understand, as many career roles could be considered professional roles given the education or experience of an employee. Generally speaking, anyone who fulfills professional services as a firm or a practice would be considered a professional.
Lawyers, architects, and dentists would be exempt from overtime. These professionals are also most likely to pay their own salary from their private practice work. The professionals category also includes skilled creative professionals like performers, musicians, actors, directors, and artists.
Overtime pay won’t affect independent contractors and sole proprietors who set their own working hours and rates. There is no chain of command if you don’t have a manager. Your compensation is based on your ability to procure customers or clients, and you can work as much or as little as you please.
What Happens If Employers Don’t Pay Overtime?
It’s not possible for employers to opt out of overtime pay. Any contract or agreement you sign with a non-exempt employee that states that they’ve agreed to work for less than the legal minimum compensation for overtime or that they’ve agreed to forgo overtime is illegal. You cannot provide a valid contract that contradicts federal law.
Employers can create their own employee classification, but the Department of Labor won’t recognize them. The Department of Labor uses its own classifications for worker type to determine who is and is not exempt from overtime pay.
If you have questions about classification and eligibility, the DoL provides further guidance with a detailed list of criteria each employee must meet to be considered exempt from overtime. If you’re still not sure, it’s best to contact them for clarification. It’s better to have a concrete answer than to assume and make a mistake, as failure to pay overtime can have costly consequences.
If you otherwise fail to provide overtime pay, your employees can sue you for the wages owed and the attorney fees they accrued in establishing a lawsuit. They can report violations like failure to appropriately pay overtime wages to the Department of Labor, which will investigate wage theft claims through their Wage and Hour Division (WHD).
If an employer is found to have committed wage theft, they can be subjected to substantial fines and ordered to pay the employee the full amount of overtime back wages owed to them.
Penalties can be more severe if the violation is found to be willful (i.e. not the result of accidental oversight or a misinterpretation of classification).
Can Employers Disallow Employees To Work Overtime?
Employers control the amount of hours employees are expected to work each week. Scheduling employees at a maximum of 40 hours and asking them to stop all work once they’ve reached the 40-hour mark is completely legal.
As long as employers aren’t asking employees to work off the clock or work from home without logging their hours, it’s absolutely fine to limit the number of hours employees are allowed to perform actual work for the company.
It may be a better business decision to allow employees to work overtime occasionally than hiring a part-time employee to fill in gaps when extra help is needed. It’s worth looking at the books to determine if all the costs associated with a new hire’s hourly wage would be more worthwhile than allowing a skilled, experienced employee to make time and a half occasionally.
Maintaining Compliance with Mosey
As an employer, you want to treat your employees right. Valued, appreciated employees are loyal, and ethical businesses succeed. You need to be sure that your employees are being compensated properly for every hour they work. Compliance can be tricky, including deciphering FLSA overtime rules, and it may not always be obvious who is eligible for overtime.
Mosey’s automated compliance solutions help small businesses keep track of all the moving parts. Mosey’s tools run in the background to help you maintain compliance while focusing on growing, building, and innovating.
Schedule a demo with Mosey to learn how we can simplify your business.
