Under the federal Fair Labor Standards Act (FLSA), employees who work more than 40 hours in a workweek and who are not exempt from overtime pay rules must receive overtime pay at a rate of not less than one and one-half times the regular rate (“time and a half”). There is no overtime pay required for work on Saturdays, Sundays, or holidays unless overtime is worked on these days.
How to figure overtime
Overtime is based on a workweek, which is a fixed and regularly recurring period of 168 hours (seven consecutive 24-hour periods). The workweek does not have to mirror the calendar week; it can begin on any day and at any hour of the day. The DOL says that averaging hours over two or more weeks is not permitted.
An employer can’t give comp time (time off at a later time) to avoid the overtime pay requirement if the comp time matches the overtime. This effectively denies the additional pay that a worker would receive for the overtime. However, if the comp time matches what would equate to overtime, then it is permissible.
Reminder: The U.S. Supreme Court ruled unanimously last year that a company doesn’t have to count the time that workers wait in line to leave the premises as work time. That case involved Amazon workers who had to go through security checkpoints when leaving the warehouse to make sure they weren’t carrying stolen goods.
Overtime pay rules don’t apply to “exempt employees.” These are workers earning a salary over a set amount. Currently, this amount is $23,660 ($455 per week). This salary threshold was set in 2004.
Under a proposed rule posted on June 30, 2015, the threshold would increase to $50,440 ($970 per week) starting in 2016. It would also create a mechanism for automatically updating the salary level to keep pace with inflation. The change proposed by the DOL in response to a Presidential directive issued last year is expected to affect about five million workers.
You can submit comments on the proposed rule by following the instructions here. The deadline for comments is July 30 (30 days from the issuance of the proposed rule).
Impact of the proposed change
As in the case of proposed increases in the federal minimum wage, there are differences of opinion on what the impact of the proposed change in the overtime pay rule would be for small businesses. The National Retail Federation expressed opposition to the rule, suggesting it would lead retailers to use more part-time workers instead of giving overtime to its full-time staffers. The National Restaurant Association, after the President’s directive but before the issuance of the proposed change, expressed concern that the change could hurt rather than help workers. It’s certain that debate will continue.
What is also certain is the need for small businesses to factor this change into their budgets and operating plans. Undoubtedly, the change in overtime pay rules is going to cost small businesses more.
DOL Fact Sheets provide answers to various questions on overtime rules. If you have a question that you can’t find an answer to, check with an employment law attorney.