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Understanding Overtime Payment Laws and FLSA Compliance

Andjelka Prvulovic
Last update on:
September 5, 2022 6:32 AM
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The number of FLSA claims filed for alleged violations has risen recently. In 2021, more than 24,700 compliance actions were filed, with $230 million in total back wages recovered


The Federal Labor Standard Act and other state overtime payment laws have been introduced to protect workers from unfair employment practices concerning wages, time off, and other work-related matters. 


If you are running a business in the USA, you are required to follow FLSA and any other overtime payment laws relevant to your business. To comply, you need to understand how to compensate your employees adequately when working overtime. 


This article will tell you everything you need to know about FLSA overtime requirements, how to implement them in your small business, and always stay compliant. 


Do Employers Have to Pay Overtime?

The Fair Labor Standard Act defines the federal overtime requirements and determines the minimum standards for overtime pay. State overtime payment laws may set different conditions.


The FLSA overtime rules mandate that unless exempt, any employees covered by the Act must receive overtime pay for any hours worked over a regular workweek.


Under FLSA, OT is compensated at one and a half times their original rate


The employer is at liberty to pay more, but that's up to their discretion. However, to comply with FLSA overtime, compensating your employee less is not an option.


Also, under the Act, employees can not waive their right to receive overtime pay. An agreement to the contrary would be considered void - it would be a lawsuit waiting to happen.


Check out our article for more details on calculating overtime pay.


What Is Considered Overtime?


Under FLSA, overtime pay comes into play for any hours worked past 40 hours in a workweek


The Fair Labor Standard Act doesn't limit the number of overtime hours in a workweek for employees aged 16 and older. 


The Act defines a workweek as a fixed and regularly recurring period of 168 hours — seven consecutive days, which don't have to overlap with the calendar week. This Act does not allow averaging of hours over two or more weeks.


Under the Act, the employer must pay the overtime hours for a particular workweek on the regular payday and along with the wage.  


There is no FLSA overtime payment requirement for working on weekends, holidays, or regular days of rest unless an employee has actually clocked in overtime hours.


However, it isn't as simple as that, as there are many other considerations when determining what can count as OT under overtime payment laws. The following are activities that still qualify as overtime:

  1. Sleeping

It might surprise you that even when sleeping, you may have to compensate for the extra hours following overtime payment laws. For example, employees taking naps between tasks on an extended shift have their nap time counted as working hours.


  1. Training

Any training programs and lectures count as work and count towards overtime pay. 


But, there are some exemptions:

  • the training is voluntary, outside of regular work hours,
  • the employee wasn't productive during the  training, or
  •  the session doesn't contribute to their job or is joined voluntarily.


  1. Charity Work

The Department of Labor recognizes charity work as work done to help better the community. Under overtime payment laws, if charity work is carried out during work hours and is related to and benefits the company, the employee should be compensated. However, if the work does not help the business or the employee voluntarily joins the task, the time will be considered exempt.


  1. Traveling

Regarding traveling, regular commuting to and from work doesn't count as overtime. That said, business conducted during that time is considered overtime. Furthermore, any traveling during working hours should be counted towards OT following overtime payment laws. 



To learn more about the state overtime payment laws - how they define overtime requirements and compensation, we suggest that you check out these articles in our Resources section:



How to Determine If an Employee Qualifies for Overtime Pay


Still, certain cases exist where employees are exempted from overtime payment laws, eliminating the need to pay them overtime hours.


Upon hiring an employee, you must decide whether they are qualified for overtime pay under FLSA overtime rules. To do that, you must figure out which of the two following criteria their circumstance satisfies:


  • They work on a salary basis.
  • They hold a position in which they are exempt from overtime pay.


The first criterion speaks for itself—the employee agrees to work and be paid based on work performed without included benefits or compensations. However, if their salary is lower than $684 a week, they still need to be compensated for any overtime hours.


For the second criterion, things get a little more complicated. To be considered exempt from overtime pay, their position needs to fall under any of the following: executive, administrative, professional, or working as an outside sales employee. 


While the executives and administrative employees have to meet, this doesn't stand for professional and outside sales employees.


To determine which categories fit your employee under overtime payment laws, put them through these criteria.


Administrative

The employee oversees the management and daily business operations of the company.

  • The employee's main duty is the exercise of discretion and independent judgment regarding matters of significance.
  • The employee's decision is made independently and significantly impacts the business.
  • The employee considers all possible courses the company can take and then decides.


These employees must also earn more than $684 per week to be considered exempt.


Executive

  • The employee's primary job is to oversee the entire business or a portion of it, such as a subdivision.
  • The employee oversees the work of multiple employees.
  • The employee has the power to hire and fire.
  • The employee's recommendations play a significant role in decision-making.


These employees must also earn more than $684 per week to be considered exempt.

Computer Employees

This FLSA overtime exemption goes for employees with excellent knowledge and experience in the computer field, such as software engineers, computer programmers, software architects, etc.


The employee's primary job is one of the following:

  • To analyze the software and hardware needs of the enterprise.
  • To design, develop, modify, and document new programs and systems under requirements given by either user or design specifications.
  • Any other related tasks that require the same skill level.


They must also earn more than $684 per week to be considered exempt.

Professional 

There are two subcategories: creative and learned professionals.


Professional (Learned)

  •  The employee's primary responsibility requires extensive knowledge of specific fields.
  • The employee acquired the knowledge needed to complete the tasks by completing a certification or earning a college degree.


Professional (Creative)

  • The employee's primary job involves creativity to invent an original idea in a creative field, such as graphics design, writing, acting, and the like.
  • The employee's work requires talent.


They need to earn more than the weekly requirement to be considered exempt.


Outside Sales

  • The employee's primary task is to complete outside sales.
  • Regularly work hours are far from the premises of the company.
  • The employee sells either tangible or intangible goods.


Regarding this position, the minimum weekly salary requirement doesn't apply.


If your employee falls under any of these categories, satisfies the appropriate requirements, 

gets paid on a salary basis, or makes at least $684 a week, they are exempt from overtime pay. You must pay them overtime if they fail to meet these criteria.

When Does New Overtime Law Take Effect?

With its spring regulatory agenda, the US Department of Labor announced that it plans to release a Notice of Proposed Rulemaking to address changes to the FLSA's overtime rules in October 2022.


The proposed rule will instruct how to implement the FLSA minimum wage and overtime requirements exemptions.


Other critical issues to be addressed are adjusting the salary levels (probably increasing them) and enabling the automatic periodic increase of a salary level. 


In the future, the salary levels will increase automatically without the DOL undertaking formal rulemaking.

Dealing With an Audit About Compliance With Overtime Payment Laws


Employers have a responsibility to pay their employees fairly. Failing to comply with overtime payment laws could result in a loss of time, money, and reputation. 


Your employees may feel like what you're doing is wrong or unfair and call upon the Department of Labor to run an audit on your business.


If that ever happens, here are a few things you can do to prepare yourself:

  • Determine the employee's position and ask others in the same position if the job description is accurate.
  • Talk to exempt employees and determine if they work longer hours than non-exempt employees. If it is a significant difference, consider to re-label them as non-exempt.
  • Check if the job description matches precisely what the employee does.
  • Educate your managers on the differences between exempt and non-exempt.
  • Analyze timekeeping records, specifically for overtime, to see if you missed out on paying any dues, even those unapproved. Address them by making the appropriate payments.
  • Compare state and federal overtime payment laws to determine if you're following the more stringent version.
  • Hire a consultant to help interpret laws and legislation so you can better understand your requirements as an employer.


How to Stay Compliant With Federal And State Employment Laws and Regulations?


Understanding FLSA and overtime payment laws is a challenging task, but you need to grasp it as soon as possible. 


Besides being cautious when categorizing your employees, you must enable your non-exempt workers to correctly record and track all the hours worked and ensure they are compensated accordingly.


As an employer, you can choose a time tracking method that you find appropriate - a paper-based timesheet template, timesheet software, or a time tracking app.

As long as your records are compliant, FLSA makes no difference. 


But, since some of these time tracking methods are inaccurate, unreliable, and don't guarantee compliance with overtime payment laws, such a decision is essential for you as an employer.


How Can Timeero Help Me Stay Compliant With Overtime Payment Laws?

Using time tracking software, your company can save money and improve overall efficiency.

calculate overtime payment with Timeero
Timeero Time And Mileage Tracking Software


Timeero can provide a digital means to track your employees and ensure that no minute is unrecorded, including mileage. Accurate timekeeping means a more precise record of your employee's working hours, giving you more control over overtime pay. 


Not only does this protect you from legal liability, but it also gives your employees peace of mind, knowing they are being compensated fairly.


Looking for a time tracking app with overtime compliance features built-in? Start your trial today, or watch our demo to see how we can help!

AUTHOR
Andjelka Prvulovic

Andjelka is a sociologist turned digital marketer. She specializes in creating content for SaaS and software companies. When she’s not researching the most effective employee management techniques, Andjelka loves cooking, reading, and fighting for human rights.

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