Overtime Pay Labor Laws
The federal law requiring employers to pay overtime to employees is the Fair Labor Standards Act (FLSA). Passed in 1938, the FLSA was enacted to ensure a number of different “fair labor standards,” most notably the requirement that most employees be paid overtime. Many states also have adopted wage and hour laws.
Generally, the FLSA requires most employers to pay overtime to employees who work more than 40 hours in a given workweek at a rate of one and one-half times the employee’s regular rate of pay. There are exceptions to the law for some workers.
During the last decade or two, employers have found it increasingly difficult to decide which employees are entitled to overtime. Those classifications are commonly referred to as exempt employees (those who meet the FLSA’s requirements to be exempt from overtime pay) and non-exempt employees (employees the law requires to be paid overtime).
The FLSA contains dozens of exemptions, which basically provide that specific categories of employers and employees aren’t subject to the Act’s overtime requirements. Most common are the “white-collar” exemptions for executive, administrative, and professional employees, computer professionals, and outside sales employees.
New overtime regulations effective December 1, 2016
The Department of Labor (DOL) has released final overtime regulations, effective December 1, 2016, that increase the salary threshold for exemption from $455 per week to $913 per week. On an annual basis, this is a salary increase from $23,660 to $47,476 per year. The DOL will automatically update the standard salary and compensation levels every three years going forward. The DOL has set the total annual compensation for exempt highly compensated employees at $134,004, up from $100,000. Employers will be able to count nondiscretionary bonuses, incentive payments, and commissions towards as much as 10 percent of the salary threshold beginning December 1, 2016. In order to count, these payments must be made on a quarterly or more frequent basis.
FLSA Rights Cannot Be Waived
Employers frequently believe that so long as their employees agree to certain pay arrangements, then there is no violation of the law. This is not the case. Employees cannot agree to waive their rights under the Fair Labor Standards Act. For example, your employees may agree to a work arrangement where they receive additional pay, benefits, and/or time off in exchange for giving up overtime pay. They may even be willing to sign a written contract to that effect. Yet such agreements are no defense to a finding of an FLSA violation by the U.S. Department of Labor (DOL). The law — not the employer or even the employee — defines an employer’s FLSA obligations. Employers need to know that an employee who willingly goes along with, or even requests, an illegal pay arrangement has the right to sue the employer for FLSA violations and recover any back pay he is owed under the law, in addition to keeping the extra pay and benefits he already pocketed under the illegal compensation system.
HR Guide to Employment Law: A practical compliance reference manual covering 14 topics, including overtime and FLSA requirements
Who enforces federal overtime laws?
The DOL’s Wage and Hour Division (WHD) is responsible for administering and enforcing the Fair Labor Standards Act. The WHD usually initiates an investigation of an employer’s overtime practices in response to an employee’s complaint. Isolated complaints on behalf of only one or a few employees may only result in a phone interview and small-scale investigation of the company, called “conciliation.” Multiple violations or complex cases may result in a full investigation by the WHD, involving employee interviews and subpoenas of the company’s records. The WHD administrator also may assess a civil penalty of up to $1,000 per violation for any repeated or willful violation the FLSA’s overtime provisions.
Learn more about correctly classifying workers with the Wage and Hour Compliance Manual
Wage and hour labor law documentation
Employers subject to the Fair Labor Standards Act are required to make, keep, and preserve carefully documentation related to their employee’s wages, hours, and other conditions and practices of employment. The FLSA requires no particular method for maintaining records, but does require that they contain certain information about the employee and data about the hours worked and the wages earned.
Audit your wage and hour and overtime policies and practices with the Employment Practices Self-Audit Workbook