Generally, if you allow your employees to work overtime, or more than 40 hours in a one week period, the Fair Labor Standards Act (“FLSA”), which is a federal law, requires you to pay your employees premium pay, or at least one and one-half times your normal pay rate, for those overtime hours worked. However, the FLSA contains several exceptions to the overtime pay requirement for certain kinds of businesses and certain kinds of employees. Because overtime pay can cost your business a significant amount of money, you need to be aware of which employees are non-exempt, or subject to the FLSA overtime pay requirement, and which employees are exempt from the overtime pay requirement under some exception.
For instance, the overtime pay requirement does not apply to regular hours worked on weekends, nights, and holidays, so long as there is not more than 40 hours worked in one week period. In other words, you are not required to pay overtime to an employee solely because he or she works on Sundays. Likewise, if your employees are executive, administrative, professional, computer, or outside sales employees, as defined by the Department of Labor regulations, and draw a salary of at least $455 per week, or $23,660 per year, then they are exempt from the overtime pay requirement. Department of Labor regulations provide very specific guidance about which positions qualify as exempt, usually based on the types of duties that those positions involve. For instance, in order for an executive position to qualify as exempt, the worker’s duties typically must involve management responsibilities, supervision of at least two other workers, and authority to hire and/or fire other employees. Furthermore, these types of exempt positions usually must be paid on salary, rather than on an hourly basis.
Employees can be covered by the FLSA in two different ways. Employees are entitled to enterprise coverage if they work for businesses or organizations that have at least $500,000 per year in sales, hospitals, nursing homes, schools, or preschools. If there is no enterprise coverage, then employees may have individual coverage under the FLSA if their job duties involve them in commerce or the production of goods for commerce, like factory workers or people who travel to other states for their jobs. Domestic service workers, such as maids or full-time babysitters, also qualify for coverage under the FLSA.
You also have to be mindful of your employees’ duties when classifying them as exempt or non-exempt. Some positions require a worker to perform both exempt and non-exempt duties. Therefore, depending on whether the worker’s duties for that particular week qualify as exempt or non-exempt, you may or may not be required to pay that worker overtime, should he or she work more than 40 hours in a one week period.
Finally, some states have also enacted laws that mandate overtime pay in certain circumstances, or that provide for overtime pay that is more than the FLSA standard of one and one-half times the regular wage. If both the FLSA and a state overtime law apply to your business, you must pay whichever overtime rate is higher to your non-exempt employees who work overtime.