FLSA Overtime FAQs

Time and one-half the “regular hourly rate.” If an employee’s regular pay is not expressed as an “hourly” rate, their regular pay rate must be converted to an hourly equivalent.

The Department of Labor provides the following examples that are based on a 40-hour workweek:

Hourly rate — (regular pay rate for an employee paid by the hour). If more than 40 hours are worked, at least one and one-half times the regular rate for each hour over 40 is due.

Example: An employee paid $8.00 an hour works 44 hours in a workweek. The employee is entitled to at least one and one-half times $8.00, or $12.00, for each hour over 40. Pay for the week would be $320 for the first 40 hours, plus $48.00 for the four hours of overtime–a total of $368.00.

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Piece rate — The regular rate of pay for an employee paid on a piecework basis is obtained by dividing the total weekly earnings by the total number of hours worked in that week. The employee is entitled to an additional one-half times this regular rate for each hour over 40, plus the full piecework earnings.

Example: An employee paid on a piecework basis works 45 hours in a week and earns $315. The regular rate of pay for that week is $315 divided by 45, or $7.00 an hour. In addition to the straight-time pay, the employee is also entitled to $3.50 (half the regular rate) for each hour over 40 — an additional $17.50 for the 5 overtime hours — for a total of $332.50.

Another way to compensate pieceworkers for overtime, if agreed to before the work is performed, is to pay one and one-half times the piece rate for each piece produced during the overtime hours. The piece rate must be the one actually paid during non-overtime hours and must be enough to yield at least the minimum wage per hour.

Salary — the regular rate for an employee paid a salary for a regular or specified number of hours a week is obtained by dividing the salary by the number of hours for which the salary is intended to compensate.

If, under the employment agreement, a salary sufficient to meet the minimum wage requirement in every workweek is paid as straight time for whatever number of hours are worked in a workweek, the regular rate is obtained by dividing the salary by the number of hours worked each week. To illustrate, suppose an employee’s hours of work vary each week and the agreement with the employer is that the employee will be paid $420 a week for whatever number of hours of work are required. Under this agreement, the regular rate will vary in overtime weeks. If the employee works 50 hours, the regular rate is $8.40 ($420 divided by 50 hours). In addition to the salary, half the regular rate, or $4.20 is due for each of the 10 overtime hours, for a total of $462 for the week. If the employee works 60 hours, the regular rate is $7.00 ($420 divided by 60 hours). In that case, an additional $3.50 is due for each of the 20 overtime hours, for a total of $490 for the week.

In no case may the regular rate be less than the minimum wage required by FLSA.

If a salary is paid on other than a weekly basis, the weekly pay must be determined in order to compute the regular rate and overtime pay. If the salary is for a half month, it must be multiplied by 24 and the product divided by 52 weeks to get the weekly equivalent. A monthly salary should be multiplied by 12 and the product divided by 52.

The exemptions provided for under the FLSA are very limited and narrow, and the burden is placed on the employer to prove that any given employee or class of employees is not exempt.

While the issue of exemptions can be complicated, the following is a general overview of the primary tests devised by the Department of Labor:

Executive Exemption

To qualify for the executive employee exemption, all of the following tests must be met:

The employee must be compensated on a salary basis (as defined in the regulations) at a rate not less than $455 per week;

The employee’s primary duty must be managing the enterprise, or managing a customarily recognized department or subdivision of the enterprise;

The employee must customarily and regularly direct the work of at least two or more other full-time employees or their equivalent; and

The employee must have the authority to hire or fire other employees, or the employee’s suggestions and recommendations as to the hiring, firing, advancement, promotion or any other change of status of other employees must be given particular weight.

Administrative Exemption

To qualify for the administrative employee exemption, all of the following tests must be met:

The employee must be compensated on a salary or fee basis (as defined in the regulations) at a rate not less than $455 per week;

The employee’s primary duty must be the performance of office or non-manual work directly related to the management or general business operations of the employer or the employer’s customers; and

The employee’s primary duty includes the exercise of discretion and independent judgment with respect to matters of significance.

Professional Exemption

To qualify for the learned professional employee exemption, all of the following tests must be met:

The employee must be compensated on a salary or fee basis (as defined in the regulations) at a rate not less than $455 per week;

The employee’s primary duty must be the performance of work requiring advanced knowledge, defined as work which is predominantly intellectual in character and which includes work requiring the consistent exercise of discretion and judgment;

The advanced knowledge must be in a field of science or learning; and

The advanced knowledge must be customarily acquired by a prolonged course of specialized intellectual instruction.

To qualify for the creative professional employee exemption, all of the following tests must be met:

The employee must be compensated on a salary or fee basis (as defined in the regulations) at a rate not less than $455 per week;

The employee’s primary duty must be the performance of work requiring invention, imagination, originality or talent in a recognized field of artistic or creative endeavor.

Computer Employee Exemption

To qualify for the computer employee exemption, the following tests must be met:

The employee must be compensated either on a salary or fee basis (as defined in the regulations) at a rate not less than $455 per week or, if compensated on an hourly basis, at a rate not less than $27.63 an hour;

The employee must be employed as a computer systems analyst, computer programmer, software engineer or other similarly skilled worker in the computer field performing the duties described below;

The employee’s primary duty must consist of:

1) The application of systems analysis techniques and procedures, including consulting with users, to determine hardware, software or system functional specifications;

2) The design, development, documentation, analysis, creation, testing or modification of computer systems or programs, including prototypes, based on and related to user or system design specifications;

3) The design, documentation, testing, creation or modification of computer programs related to machine operating systems; or

4) A combination of the aforementioned duties, the performance of which requires the same level of skills.

Outside Sales Exemption

To qualify for the outside sales employee exemption, all of the following tests must be met:

The employee’s primary duty must be making sales (as defined in the FLSA), or obtaining orders or contracts for services or for the use of facilities for which a consideration will be paid by the client or customer; and

The employee must be customarily and regularly engaged away from the employer’s place or places of business.

Highly Compensated Employees

Highly compensated employees performing office or non-manual work and paid total annual compensation of $100,000 or more (which must include at least $455 per week paid on a salary or fee basis) are exempt from the FLSA if they customarily and regularly perform at least one of the duties of an exempt executive, administrative or professional employee identified in the standard tests for exemption (see above).

Blue Collar Workers

The exemptions provided for “white collar” employees do not apply to manual laborers or other “blue collar” workers who perform work involving repetitive operations with their hands, physical skill and energy.  Non-management employees in production, maintenance, construction and similar occupations such as carpenters, electricians, mechanics, plumbers, iron workers, craftsmen, operating engineers, longshoremen, construction workers and laborers are entitled to minimum wage and overtime premium pay under the FLSA, and are not exempt no matter how highly paid they might be.

Collective Bargaining Agreements

The FLSA provides minimum standards that may be exceeded, but cannot be waived or reduced. Employers may, on their own initiative or under a collective bargaining agreement, provide a higher wage, shorter workweek, or higher overtime premium than provided under the FLSA.

Often an employer will break down an employee’s salary into an hourly amount for payroll purposes to accommodate the payroll system that the employer uses. The fact that your pay stub shows an hourly amount does not necessarily mean you are being paid hourly and entitled to overtime pay.

If you are paid on a salary basis, you should receive the same amount of pay for each week that you work regardless of the numbers of days or hours you work.

Employees must retain all of their tips, except to the extent that they participate in a valid tip pooling or sharing arrangement. A tip pool can often be invalidated if tips are shared with managers, dishwashers, cooks, chefs or others who are not entitled to share in tips.

There are specific legal requirements for determining if someone is an independent contractor. Often times employers will label someone an “independent contractor” when, in fact, they are not. There is no single rule or test for determining whether an individual is an independent contractor or an employee for purposes of the FLSA. The Supreme Court has held that it is the total activity or situation which controls. Important factors to consider include:

1. The extent to which the services rendered are an integral part of the principal’s business.

2. The permanency of the relationship.

3. The amount of the alleged contractor’s investment in facilities and equipment.

4. The nature and degree of control by the principal.

5. The alleged contractor’s opportunities for profit and loss.

6. The amount of initiative, judgment, or foresight in open market competition with others required for the success of the claimed independent contractor.

7. The degree of independent business organization and operation.

While most true independent contractors are not entitled to overtime, if you are being misclassified as one, you are entitled to receive overtime pay.

It is easily the most favorable method for employers of computing overtime, but certain requirements have to be met. To use this method:

• the employee must have a work schedule with fluctuating hours, i.e., not be on a fixed schedule,

• and must be paid a fixed salary that is meant to be straight-time compensation for all hours worked in a workweek, whether the employee works less than or more than 40 hours per week.

• With almost no exceptions, no reduction in the salary may be made for short workweeks.

• In addition, the salary must be large enough to ensure that the regular rate will never drop below minimum wage.

In such a situation, the regular rate is determined by dividing the fixed salary by the number of hours worked that week. Since the fixed salary is already deemed to compensate the employee at straight time for all hours worked, any overtime hours only need to be paid at “half-time”, instead of time and a half. The employee has already been paid straight time by virtue of the salary, and the straight time is only paid once, so the overtime hours will be paid at half the regular rate, thus bringing the employee up to time and a half. In workweeks in which the overtime is high, the regular rate will be low, and the employer will enjoy a lower per-hour overtime cost.

The drawback for the employer is that if work is slow, and the employee is only working 25 or 30 hours per week, the fixed salary must still be paid.

If a field service tech must start their day at home with a call to obtain that day’s schedule, they are on the clock at that point, and all time until the end of the day must be paid. That includes traveling to the first job of the day, which for most employees would be unpaid commuting time.