What You Need to Know About Overtime Pay

Overtime Under the Fair Labor Standards Act (FLSA) 

PURPOSE

The FLSA requires covered employers to pay eligible (nonexempt) employees at least 1 1/2 times their regular rate of pay for all hours worked in excess of 40 in a workweek. State laws may have more-generous requirements.

FLSA COVERAGE

The FLSA applies to employees working in any U.S. state, the District of Columbia, or any U.S. territory or possession. Employees who work for certain businesses or organizations (enterprises) are covered by the FLSA.

HOURS WORKED

Overtime pay is triggered when an employee works more than 40 hours in the workweek. This amount of time includes only actual hours worked and excludes pay for time not worked, such as vacation or sick leave.

REGULAR RATE

The regular rate is the hourly rate actually paid to the employee for the normal, nonovertime hours worked. The regular rate of pay cannot be less than the minimum wage and includes all remuneration for employment except certain payments excluded by regulation.

WORKWEEK

A workweek is a period of seven consecutive 24-hour periods (168 hours). It may begin on any day of the week and at any hour of the day established by the employer.

CALCULATING OVERTIME DUE

This calculation can be as simple as multiplying the number of hours worked over 40 in a workweek by 1 1/2 times the regular rate of pay. It can also be more complex, such as when shift work, bonuses or semi-monthly payrolls are involved, or when there are other arrangements for employees whose workweeks fluctuate.

PAYMENT OF OVERTIME

Overtime compensation must be paid on the regular payday for the period in which such workweek ends or as soon as practicable after the regular pay period if the correct payment amount cannot be determined immediately.

RECORDKEEPING

Every covered employer must keep detailed records for each nonexempt worker regarding hours worked and wages paid. Payroll records must be maintained for at least three years, and records on which wage computations are based, such as timecards, must be retained for two years.

POSTING REQUIREMENT

All employers covered by the FLSA must post a notice in a conspicuous place in all of their establishments where employees can readily read it.

COMMON ISSUES

ALTERNATIVE WORK SCHEDULES

Some compressed workweek schedules, such as nine, nine-hour days with one day off every other week, result in overtime hours during one of the two weeks of a biweekly pay period.

OVERLAPPING WORKWEEKS

Each workweek stands alone when determining overtime pay requirements for nonexempt employees. There may be circumstances when an employee's hours are attributed to two different workweeks.

IDENTIFYING HOURS WORKED

Travel time, on-call time and training time are all hours that need to be counted toward hours worked when determining overtime pay.

RECORDING HOURS WORKED

The hours-worked recordkeeping onus is on the employer, not the employee. While employers often require employees to track and report all hours worked, failure to do so does not relieve an employer of the duty to pay the employee.

EXEMPTION FROM OVERTIME

Some positions may be exempt from overtime pay requirements based on the payment of a minimum salary and certain job duties.

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