What to Know About Overtime Rules

by | Jun 17, 2024 | Blog

The federal overtime provisions contained in the Fair Labor Standards Act say that unless an employee covered by the FLSA is exempt, they receive overtime pay when they work more than 40 hours in a workweek

There’s no limit on the number of hours employees age 16 and older may work in any workweek. The FLSA doesn’t require overtime pay for work on Saturdays, Sundays, holidays or regular days of rest, unless overtime is worked on such days.

But what is a workweek? An employee’s workweek is a fixed and regularly recurring period of 168 hours — seven consecutive 24-hour periods. A workweek doesn’t have to coincide with the calendar week; it may begin on any day and at any hour of the day. Averaging hours over two or more weeks is not permitted.

Pay for vacations, sick days or personal days is not covered by the FLSA, nor does the FLSA talk about double time, which are agreements between an employer and employee.

Who is eligible for overtime pay?

An employee’s eligibility for overtime pay is based on employee classification — exempt or nonexempt. Nonexempt employees must be paid at least the minimum wage for all hours actually worked and the appropriate overtime premium when they work more than 40 hours in a workweek. States may have additional obligations, so you should check on those.

An exempt employee typically works in a professional, executive or administrative position and meets the following three requirements:

  • Earns at least the standard threshold of $684 per week (increased from the previous level of $455).
  • Receives pay on a salary basis.
  • Performs job duties considered exempt.

These employees are called exempt because they are not entitled to overtime pay.

What is an exempt employee?

Let’s delve into the details of the exempt categories:

  • Professional duties involve exercise of discretion and judgment.
  • Executive duties involve managing or supervising two or more full-time employees, with authority to hire and fire.
  • Administrative duties involve nonmanual work that helps in managing the business.

Other employees who are exempt from overtime pay requirements might include outside sales executives, certain skilled computer professionals, certain commissioned employees at retail stores or service establishments, employees at seasonal amusement or recreational establishments, workers at certain small newspapers or small farms, seamen employed on foreign vessels, and employees engaged in fishing operations, newspaper delivery or babysitting. Auto, truck, trailer, farm, boat and aircraft salespeople employed by nonmanufacturing establishments are likewise exempt.

Paying overtime

Employers covered by the FLSA are required to pay the applicable overtime premium to nonexempt employees even if the work resulting in overtime wasn’t authorized. However, employers are allowed to implement a policy prohibiting unauthorized overtime.

Some smaller businesses that don’t meet the specifications covered by the FLSA still might have obligations under a state’s overtime law, as well as an obligation to pay overtime to nonexempt employees.

An employee can refuse to work overtime (Herman Melville’s story “Bartleby, the Scrivener” may come to mind), but they should be mindful that in at-will employment states they can be fired for refusing an employer’s request.

The risk involved for not paying overtime can be substantial — you could be required to pay back wages, fines and possibly the employee’s legal fees. Employers should consult legal counsel and their state labor department.

Normally, overtime pay earned in a workweek is paid on payday.

More about overtime

However, the situation is now changing even as you read this! According to a Department of Labor release, a newly issued rule increases the salary threshold required to exempt a salaried bona fide executive, administrative or professional employee from federal overtime pay requirements. And this is happening now.

The release states, “Effective July 1, 2024, the salary threshold will increase to the equivalent of an annual salary of $43,888 and increase to $58,656 on Jan. 1, 2025.” The present annual salary threshold is $35,568. “Starting July 1, 2027, salary thresholds will update every three years by applying up-to-date wage data to determine new salary levels,” the release says.

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