1. SALARY FOR NON-EXEMPT EMPLOYEES
Many employers claim that all salaried employees are not entitled to overtime pay. This is not true. There are 2 categories of employees – exempt and non-exempt. Exempt employees are those who, due to their job duties, are not legally entitled to overtime and are, therefore, “exempt” from the laws regarding overtime pay. Some salaried positions can be exempt depending on the position’s job duties.
However, if the position does not have the specific job duties listed for one of these exemptions, the employee will be entitled to overtime pay – even though they are paid a salary. Read our article on Common Overtime Pay Problems to see more like this.
2. DAY RATE PAY
Many employers fail to pay day rate employees overtime pay as required by law. Many employers and employees think that an employee who is paid a day rate is not entitled to overtime pay. Merely paying a day rate does not exempt an employer from paying overtime pay. Day rate employees are entitled to overtime pay unless they are covered by a specific exemption.
If an employee is paid on a day rate basis, overtime pay is calculated by adding up each day’s earnings for the workweek, then dividing by the total number of days worked to get the employee’s regular rate of pay. The employee is then entitled to extra half-time pay at this rate for all hours worked over 40 in the workweek.
Example: Employee is paid a day rate of $100 per day and works 5 days during the week for a total of 50 hours. Total Weekly Earnings = $500.
Overtime pay = $500 / 50 hours x ½ x 10 overtime hours = $50.
3. BONUS NOT INCLUDED IN OVERTIME CALCULATION
The overtime law requires that a covered, non-exempt employee be paid time and a half their regular rate of pay for any hours worked over 40 per week. The regular rate of pay includes all forms of pay including non-discretionary bonuses. Employers often fail to include non-discretionary bonuses when determining overtime pay. When bonuses are included, the employee is entitled to receive a higher amount of overtime pay.
According to the DOL, “non-discretionary bonuses include those that are announced to employees to encourage them to work more steadily, rapidly or efficiently, and bonuses designed to encourage employees to remain with a facility.” Non-discretionary bonuses are usually based on standards that have to be met in order to receive the bonus. If these standards are met, the employee can expect to receive the bonus. Examples include production-based bonuses, incentive-based compensation, retention bonuses.
Discretionary bonuses are generally given at the sole discretion of the employer. Usually the amount, timing, or requirements to get the bonus are not disclosed in advance. An example would be a holiday bonus.
4. INDEPENDENT CONTRACTOR MISCLASSIFICATION
Many businesses will hire workers and classify them as independent contractors (1099 workers or 1099 “employees”) instead of as employees. Since the overtime and minimum wage laws only regulate employer and employee relationships and do not apply to true independent contractors, businesses often misclassify their workers as independent contractors in an effort to avoid paying overtime and employer payroll taxes.
People who are in an independent trade, business, or profession in which they offer their services to the general public are generally independent contractors. There is no one factor that determines the classification of a worker. The following are factors that may indicate that a worker is an employee:
- Employer has the right to direct and control the worker (even if he does not do so)
- Paid on an hourly, weekly, or monthly basis
- Uses equipment, tools, and materials provided by the employer
- Receives predetermined earnings and cannot realize significant profits or loss
- Schedule dictated by the employer
- Trained by the employer, either formally or informally
- Receives benefits, such as insurance, pension, or paid vacation or sick leave
- The relationship between employer and worker is ongoing – not on a job or project basis
5. STRAIGHT TIME FOR OVERTIME
One of the most common violations of the overtime laws involves employers paying covered, non-exempt employees straight time (their regular hourly rate) for overtime hours instead of time and a half.
For example, if a covered, non-exempt employee’s hourly rate is $10/hour, their overtime pay rate is $15/hour ($10 x 1.5). Therefore, the employee should be paid $15/hour for all hours over 40 per week. If the employee works 50 hours for the week and is only paid straight time pay ($10/hour) for all hours, they would be entitled to additional overtime pay of $50 = $10 x ½ x 10 overtime hours.
Employers will often try to claim they told the employee they don’t pay overtime or even have the employee sign something stating they are not getting overtime. However, employees cannot waive their right to overtime pay or agree to not be paid overtime pay.
