Overtime Introduction & Myth 1:
Employers Must Pay Overtime to Any Employee Working Over 40 Hours
Welcome to the first myth in the blog series on the 11 Employee Overtime Myths: Employees Working Over 40 Hours. This series was written to help you navigate the very complicated, and often confusing, regulatory environment of federal employee overtime classification. The content from this series comes from the ComplianceHR whitepaper Overtime Myths.
Introduction:
The laws governing overtime are complex, and the tests to determine eligibility are ambiguous enough that they can create significant compliance risk for employers who are not diligent in their application.
Because of this complexity, there are often misunderstandings about overtime rules and how to determine exemptions. This employee overtime blog series highlights some of the most common myths, like overtime for employees working over 40 hours, along with the reality of the FLSA’s requirements.
FLSA Overview
The Fair Labor Standards Act (FLSA) requires employers to pay non-exempt employees (often referred to as “hourly” employees) an overtime premium if they work more than a 40 hour workweek. The overtime premium must be at least 1.5 times the employee’s regular rate of pay.
The US Department of Labor (DOL) has established a three-pronged test to determine eligibility for overtime, defining what is referred to as a non-exempt employee:
- Minimum salary threshold
- Salary basis test
- Primary duties test
In addition to this three-pronged test, there are also a number of established exemptions to the overtime rules. These exemptions define what is often called an exempt employee, including, but not limited to:
- Executive
- Administrative
- Professional
- Computer
- Outside-sale
- Highly Compensated
Want to learn more about the FLSA law and its compliance risks? Please refer to the companion ComplianceHR whitepaper, The Danger of Making the Wrong Overtime Classification Decision.
Overtime Myth 1: Employers Must Pay Overtime to Any Employee Working More Than 40 Hours
Reality:
This first myth is a fairly simple one. It gets to the core definition and requirements for a worker to be classified as a non-exempt employee under the FLSA regulations. Simply put, non-exempt employees must be paid overtime. Conversely, there is no overtime requirement for exempt workers, provided they are classified properly.
In general terms, exempt employees are “white collar” employees who meet all of the following conditions:
- They are salaried, which means they receive a fixed, predetermined payment. However, under the final rule, up to 10% of the standard salary level can come from non-discretionary bonuses, incentive payments, and commissions paid at least quarterly.
- They are paid more than a threshold amount per week or annually.
- They primarily perform executive, administrative, or professional duties.
How can I read the rest of the 11 Employee Overtime Myths?
Sign up to receive the email alert when a new employee overtime myth is published. Alternatively, you can check back in to the Resources section of our website weekly, or download the Overtime Myths whitepaper.
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About ComplianceHR
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Disclaimer
This blog and the associated whitepaper are intended to serve as a starting point for educating Human Resources and Legal professionals on certain aspects of legal obligations of employers. It is not a comprehensive resource or a complete explanation of requirements. It offers practical information concerning the subject matter and is provided with the understanding that ComplianceHR is not rendering legal or tax advice, or other professional services. The contents are intended for general informational purposes only, and you are urged to consult your attorney concerning any particular situation and any specific legal questions you may have.
