Federal Labor Law: Hours in Excess of 40 Per Week
The Fair Labor Standards Act governs federal overtime policies, which say overtime hours are those an employee works beyond 40 for the week. Under the FLSA, nonexempt employees must receive overtime wages if they work the hours. Exempt employees are excluded from the act’s overtime pay provisions.
Nonexempt Employees
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Nonexempt employees are usually hourly employees, who must receive overtime pay at one and one-half times their regular hourly pay rate for work hours above 40 per week. The employee must actually work more than 40 hours to get overtime pay. If she obtains the excess hours because of other types of hours, such as holiday or vacation hours, pay the overage at her regular hourly rate. Compensate overtime on the employee’s next regularly scheduled payroll.
Exempt Employees
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Exempt employees are usually salaried employees to whom you do not have to pay overtime, even if they work more than 40 hours per week. These employees must meet FLSA guidelines based on their job duties and, in some cases, pay range to qualify as such. Because not all salaried employees meet the exempt criteria, it’s possible for a salaried worker to be nonexempt, which qualifies her for overtime. You may compensate your salaried exempt employees in other ways if they work more than 40 hours for the week, such as a flat sum, bonus, extra time off, sales commission, a share of the company’s profits or an hourly rate. You may pay time and half for the extra hours, but apply this practice with caution because it could appear like overtime wages, which may cause misunderstandings as to whether the employee is truly exempt.
Tipped Workers
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Tipped employees qualify for overtime if they work more than 40 hours for the week. Such employees must receive direct hourly wages of at least $2.13 if that amount plus their tips amount to at least the federal minimum wage of $7.25, as of time of publication. To bring the employee’s pay up to at least the minimum wage, you may take a tip credit of up to $5.12 per hour against the employee’s tips. If the employee’s hourly rate exceeds the minimum wage, calculate overtime at one and one-half times her regular hourly rate. If she earns the minimum wage, calculate overtime by first adding half the minimum wage, which is $3.625, to $7.25, which comes to $10.875. Then, subtract the tip credit of $5.12 to get $5.755, which applies to work hours over 40.
Unauthorized Overtime
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Establish a clear and written policy about unauthorized or off-the-clock overtime. The National Federation of Independent Business says along with developing the policy, you may discipline employees who work unauthorized overtime. Although you may discipline them, you cannot withhold their overtime wages. Disciplinary action may include a written warning or termination.
References
- U.S. Department of Labor: Overtime Pay
- BTLG Attorneys at Law: Overtime for Exempt Employees
- U.S. Department of Labor: Fact Sheet #15: Tipped Employees Under the Fair Labor Standards Act (FLSA)
- National Federation of Independent Business: Payment for Unauthorized Overtime: Urban Legend or Ticking Time Bomb?
Resources
Writer Bio
Grace Ferguson has been writing professionally since 2009. With 10 years of experience in employee benefits and payroll administration, Ferguson has written extensively on topics relating to employment and finance. A research writer as well, she has been published in The Sage Encyclopedia and Mission Bell Media.