Labor laws exist to protect your workers from unfair employment practices concerning wages, time off, and other work-related matters on both the federal and state level. The Fair Labor Standard Act mandates that any employees working approved overtime must receive overtime pay. In general, overtime pay comes into play for any hours worked past 40 hours at the rate of one and a half times their original rate. The employer is at liberty to pay more, but that’s up to their discretion. However, there are certain cases where employees are exempted from the overtime labor law, eliminating the need to pay the individual any overtime.
In this article, we’ll talk about the overtime labor law, how to implement it into your small business, and how you can determine who is qualified for overtime pay.
Determining Whether an Employee Qualifies for Overtime Pay
Upon hiring an employee, you must decide whether the individual is qualified for overtime pay. To do that, you must figure out which of the two following criteria their circumstance satisfies:
- The individual is a salary basis
- employee, or they are one that holds a position in which they are exemption to overtime pay.
The first criteria speak for itself—the employee agrees to work and be paid based on work performed without included benefits or compensations.
For the second criterion, things get a little more complicated. First, you’ll have to determine if the employee’s pay is at least $455 a week and that his or her position falls under any of the following: executive, administrative, or professional.
There are another three sub-categories under professional:
1) computer professional
2) creative professional
3) learned professional
These employees are exempt from overtime pay. Finally, if the employee is considered an outside sales employee, the individual still is exempted from overtime pay.
To figure out which of the categories, if any, fit your employee, put them through any of these criterions.
- The employee is overseeing the management and daily business operations of the company.
- The employee is discrete.
- The employee’s decision is made independently and has a significant impact on the business.
- The employee considers all possible courses which the company can take then makes a final decision.
- 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.
- The employee’s primary job is one of the following:
- to analyze the software and hardware needs for 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
- 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.
- The employee’s primary job involves creativity to invent an original idea in a creative field such as graphics design, writing, acting, and the likes.
- The employee’s work requires talent.
- 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.
If your employee falls under any of these categories, satisfies the appropriate requirements, and gets paid on a salary basis or makes at least $455 a week, the employee is exempt from overtime pay. If any of the conditions aren’t met, you may have mistakenly withheld overtime pay for an employee.
Determining How Much to Pay an Employee Working Overtime
If your employee does qualify for overtime pay, you’ll need to know how much you should be paying.
In most cases, the minimum overtime pay is any hours worked to pass the 40-hour mark at the rate of one and a half times the original pay per hour. You can go higher than one and a half times, but no less.
However, it isn’t as simple as that, as there are many other considerations to make when determining what you can count has overtime. The following are activities that still qualify as overtime:
1 – Sleeping
It might surprise you to know that even when sleeping, you have to compensate for the extra hours with overtime pay. For example, employees working on an extended shift taking naps in between tasks have their nap time counted as working hours.
2 – Training
Any training programs and lectures count as work. However, there are exemptions to this, as well. If the training is outside of regular work hours, it is not considered in hours worked. If the employee wasn’t productive during the training, the time spent still isn’t calculated. If the session doesn’t contribute to their jobs or is joined voluntarily, then the hours won’t be taken into account.
3 – Charity Work
The Department of Labor recognizes charity work as work is done to help better the community. Because of that, 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 joined the task, the time will be considered exempt.
4 – Traveling
Under traveling, regular commuting to and from work doesn’t count as overtime. That said, business conducted during that time is considered overtime. Any traveling during working hours also is calculated. At the same time, if traveling is part of the job, such as traveling to meet customers to complete sales, the travel time is counted. Travel time for an emergency job requires an employee to make their way to a customer’s location. Any assignments that require an employee to travel should also be counted, except for standard break times, such as for meals.
Dealing with an Audit
Employers have a responsibility to pay their employees fairly. Failing to deal with overtime pay appropriately 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 position of the employee in question and ask others in the same position if the job description was accurate.
- Talk to exempt employees and determine if they work longer hours than nonexempt employees. If it is a significant difference, consider to re-label them as nonexempt.
- Check if the job description falls in line with precisely what the employee does.
- Educate your managers on the differences between exempt and nonexempt.
- 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 labor laws to determine if you’re following the more stringent version.
- Hire a consultant to help interpret laws and legislations to help you better understand your requirements as an employer.
Overtime labor law is a complicated law that you need to grasp ahold of right away. Without a proper understanding of what it is, how it works, and how it affects you, you can get into serious trouble mistreating your employees. With that said, don’t be afraid to work with consultants and professionals to help define what the law means to you, and how you can properly utilize it in your business.
Timeero can provide you with a digital means to track your employees and making sure that not a single 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? Get in touch with us today to see how we can help!