Overtime Pay: Federal Laws and State Regulations

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For many employees across the US labor market, supplemental pay, such as overtime, remains an essential component of overall earnings, but navigating through various overtime laws and regulations is a rather challenging task for employers. Apart from federal laws, each state has its own set of regulations that businesses must adhere to. In instances where state and federal laws differ, perplexity is inevitable, and, in order to develop sufficient legal competence, one must form a clear understanding of both.

Overall Picture and Federal Laws

In the United States, overtime regulations are outlined in the principal federal law – the Fair Labor Standards Act (FLSA). It institutes a weekly overtime standard, meaning that once an employee works beyond the designated threshold of 40 hours a week, they are entitled to overtime pay, unless exempt.

This is irrespective of how many hours they work in a day. Thus, for example, if an employee does 12 hours on Monday, 8 on Tuesday and does not work any other hours for the rest of the week, he or she would not be entitled to overtime under the weekly standard, as the total working hours for the week do not exceed 40.

Standard workweek + workday

The FLSA also outlines that the overtime rate employers are required to pay their employees must be no less than one time and a half their regular pay rate. For instance, an employee working 43 hours a week for $10 an hour would be paid $10 an hour for 40 hours and $15 an hour for the 3 hours of overtime.

Exemptions

There are a number of occupations that are exempt from receiving overtime rate.

Some professions are inexplicitly associated with overtime as part of the expected job duties and, thus, are exempt from the FLSA. For instance, for nurses and firefighters, prolonged shifts are expected in their line of duty, and, therefore, more often than not they are excluded from earning overtime pay.

Administrative exemption typically applies for employees when they accept a flat wage for a vocation that requires working extended hours.

As per the FLSA, the following employees are exempt from receiving overtime rate:

  • Executive, administrative and professional employees
  • Outside sales employees
  • Certain skilled computer professionals (for instance, analysts, programmers and software engineers)
  • Certain seasonal amusement or recreational establishments (such as ski resorts)
  • Certain small newspapers and switchboard operators
  • Seamen employed on foreign vessels
  • Employees engaged in fishing operations
  • Employees engaged in newspaper delivery
  • Farm workers employed on small farms
  • Casual babysitters
  • Certain commissioned employees of retail or service establishments
  • Auto, truck, trailer, farm, implement, boat or aircraft salespersons employed by non-manufacturing establishments
  • Auto, truck or farm implement parts clerks and mechanics employed by non-manufacturing establishments primarily engaged in selling these items to ultimate purchasers
  • Railroad and air carrier employees, taxi drivers, certain employees of motor carriers, seamen on American vessels and local delivery employees paid on approved trip rate plans
  • Announcers, news editors and chief engineers of certain non metropolitan broadcasting stations
  • Domestic service workers who live in their employers’ residences
  • Employees of motion picture theaters
  • Farm workers

Although traditionally excluded from receiving overtime pay, some exempt workers might now qualify for it. The update to the FLSA, effective from January 1, 2020, has increased the salary level for exemption from $455 a week to $684 a week. This means that salaried employees in the executive, administrative, professional, outside sales and computing positions may now be eligible for overtime if they earn less than $684 a week.

In such circumstances, the Local Wage and Hour Division Offices would be the best point of reference for the most accurate guidelines.

State Laws

Many states have varying overtime laws. While some do not have designated overtime rules and adhere to the federal laws, others have a rather specific set of regulations.

For example, many states have daily overtime laws. When daily standards are in place, the employee is entitled to overtime rate for hours worked beyond a designated threshold on any given day, even though the total hours for the week might not be beyond 40. The threshold differs from state to state, and while some (such as Alaska and California) consider overtime any workday that is over 8 hours, others (like Colorado) start counting overtime after 12 hours of work.

It is recommended to refer to the respective State Labor Offices for details regarding overtime conditions and rates. However, it is important to remember that in cases where both federal and state laws apply, the employee is entitled to receive overtime as per the ruling that provides the highest rate of pay.

Tools and Resources

Under the FLSA, employers are also required to keep employee records, such as hours worked each day and total hours worked each workweek, as well as the total overtime earnings for the week.

As long as it is complete and precise, any form of timekeeping is acceptable. Some organizations prefer to track this information with the aid of time tracking solutions, such as actiTIME, which helps to automate the process and store all the essential records in one place.

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If you need help with calculating overtime pay for your workers, use our overtime calculator that is specifically designed to do all the complicated math for you.

To learn more about overtime pay requirements, you may refer to a comprehensive list of resources offered by the Wage and Hour Division of the US Department of Labor. It includes fact sheets, interpretive guidance and other useful materials aimed at providing assistance to both employers and employees in terms of adherence to regulations.

 

Do you have any comments and questions regarding this article? Please share them with us at productivity@actitime.com

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