FLSA: The key points of the FLSA federal overtime pay legislation
The provisions of the federal overtime pay law are contained in the Fair Labor Standards Act, or FLSA. The overtime provisions apply to nonexempt employees on a weekly basis. Some of the key factors guiding this provision are:
- Non-exempt employees must receive overtime pay when they work over 40 hours in a workweek
- Overtime pay is equivalent to 150% of the hourly rate of pay.
- Employers can start the workweek on any day of the week because the week does not need to coincide with the calendar week (i.e. Tuesday – Monday is the workweek).
- Exempt employees are considered to be salaried employees that make over $23,660 or $455 per week. Salaried employees that make less than that amount are still eligible to receive overtime pay.
- Some positions are considered to be exempt from overtime and minimum wage requirements.
Employees who are NOT exempt from overtime pay
The FLSA’s overtime provisions apply specifically to non-exempt employees. Companies must compensate non-exempt employees to meet federal overtime requirements. Employees that are paid at an hourly rate are non-exempt, and salaried employees that make less than $23,660 per year (or $455 per week) are also non-exempt, meaning they must receive overtime pay for the hours they work over 40 hours per week.
When non-exempt employees have hours that vary from week-to-week, companies must carefully monitor their payroll records to ensure that those employees receive overtime compensation. Payroll managers and staffers must be diligent in identifying the employees who meet these criteria, as to prevent any fines or penalties that would stem from FLSA and Department of Labor (DOL) violations.
Are there any alternatives to overtime pay?
The most commonly asked about alternative to overtime is compensatory time. Compensatory time, or comp time, is the idea that employers can supplement overtime pay with additional paid time off. For example, John Smith worked 50 hours in week A, so in order to avoid paying overtime pay John Smith’s employer gave him an additional 10 hours off in week B. Compensatory time SHOULD NOT be used to supplement overtime. Even though many employers consider this option, the FLSA does not recognize compensatory time in lieu of overtime. In fact, it is illegal for employers to offer compensatory time instead of paying overtime wages.
How can employers avoid mismanaging overtime pay?
Companies are responsible for meeting the standards of FLSA’s overtime pay provisions. Therefore, it is in their best interest to spend the additional time calculating exact overtime wages, identifying the exact number of employees who qualify as non-exempt employees, and appropriately documenting wage history. Failing to do so could result in significant fines, penalties, and employee dissatisfaction. Here are a few tips on how to eliminate the guesswork involved in calculating overtime requirements:
- Develop an internal accounting structure that regularly evaluates and classifies employees as exempt or non-exempt.
- Optimize your pay period workweek. Remember: you can start your workweek on any day of the week. The only requirement is that the workweek is 7 consecutive days. For example: Saturday – Friday could be an optimal workweek.
- Stay current with your state’s overtime wage laws. A complete understanding of the state, local, and federal regulations governing overtime is the best way to avoid FLSA violations.
- The FLSA does not dictate whether time periods such as on-call time, meal periods, and travel time are considered work time or not (thus affecting whether employees are compensated for those activities).
- Finally, employers always have the opportunity to outsource the payroll process to professionals that understand state, local, and federal laws. If you don’t have the time to, then outsourcing payroll and human resources to other companies is an affordable and secure way to ensure that you avoid any FLSA overtime violations