By Dr. Gary L. Deel, Ph.D., J.D.
Faculty Director, School of Business, American Public University
Note: This article contains content adapted from lesson material written for APUS classes. This is the third article in a five-part series on the slow growth and evolution of federal laws that protect employee rights in the workplace.
In the first part of the series, we talked about the importance of power balance in the workplace and the role of the National Labor Relations Act (NLRA) in protecting workers’ rights to unionize. In the second part, we introduced the Fair Labor Standards Act (FLSA) and its minimum wage provisions. Now, we will look at the FLSA’s overtime rules as they apply to the workplace.
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In addition to minimum wage standards, the FLSA also governs workers’ mandatory overtime pay. Prior to overtime pay regulation, employers could force employees to work inhumanely long hours without additional compensation. The FLSA overtime rules require that employees who work more than 40 hours in any given week be paid at least time-and-a-half on all hours over 40.
There are, however, a few important caveats to note here. First, neither the FLSA nor any other federal legislation caps the number of hours that an employer can require an employee to work. Employers are free to require their employees to work as many hours as the employer pleases; if an employee refuses, the employer may legally terminate him or her for cause.
Overtime Compensation Is Much More Expensive for Employers
However, the reality of the FLSA overtime compensation mandate means that all hours over 40 for each employee are much more expensive for the employer, 50 percent more expensive to be exact. Thus, this workplace law financially encourages employers to limit working hours and avoid overtime whenever possible.
Additionally, employers who make employees work unreasonably long hours run the risk that an employee might exercise poor judgment or become negligent by being sleep-deprived or otherwise just “burned out.” So this is yet another incentive for employers to be reasonable with respect to required hours.
Another important thing to remember is that the overtime requirement mandates time-and-a-half pay on all hours over 40 a week. This is important because not all employers pay their employees on a weekly basis.
Employers have begun to realize that paying employees less frequently results in reduced overhead costs for the payroll function. Since there are no federal regulations governing pay frequency, many employers are choosing to pay their employees on a biweekly or even monthly basis.
Hours from More Than One Week Cannot Be Aggregated to Calculate Overtime Pay in the Workplace
However, just because the pay interval is increased does not mean that hours from more than one week can be aggregated for the sake of calculating overtime pay. For example, suppose an employer pays biweekly and, in a given pay period, an employee works 60 hours the first week and 20 hours the second. The employer is not permitted to aggregate the hours and deny overtime pay simply because the employee’s work hours across the two weeks total 80, or that which would be expected from two standard 40-hour work weeks. Instead, the employer must compensate the employee for the 20 hours of overtime accrued in the first week, notwithstanding the fewer hours in the second week.
Always Check State Employment Regulations before Making Pay Period Decisions
It’s worth noting some states have enacted laws that restrict the length of pay periods, so employers should always check their state employment regulations before making any decisions about what constitutes a pay period.
A final important matter to consider with respect to overtime regulations is that some employees may be classified as exempt from these rules based on their duties. Whether or not an employee can be classified as exempt under FLSA is usually determined by three factors:
- The amount of compensation: Employees paid less than $23,600 per year are considered non-exempt. They must be compensated for all overtime hours. On the other end of the spectrum, most employees compensated at $100,000 or more are considered exempt, but this is not true in every case.
- How compensation is structured: When employees are paid a fixed salary not subject to change based on hourly productivity, they are more likely to be construed as exempt (though workplace exceptions exist).
- The nature of the position: Employees are likely to be considered exempt if they regularly supervise two or more other employees as a primary duty of their position and have input on the status of such employees’ jobs.
Generally speaking, executive and administrative employees may be eligible for exemption. However, it is important to note that titles are of little significance in a legal assessment of eligibility for exemption. An employer can call any employee a “manager” if he wishes, but if the circumstances of that employee’s job do not meet the standards for exemption, her title will not affect such a finding.
There is also a special exemption for “professional” employees who might not otherwise meet the above test. This exception applies to the traditional notion of “profession,” which includes doctors, lawyers, dentists, teachers, architects and clergy.
As with the minimum wage standard, states are free to tighten restrictions on overtime laws and set additional thresholds for compensation. For example, in addition to FLSA standards, California requires employers to pay their employees time-and-a-half for any hours over eight in a workday, and double time pay for any hours over 12 in a workday.
There are also special exceptions for certain industries at the federal level. Nursing, for example, may adopt an “8 and 80” rule paying overtime pay on any hours beyond eight in a day or 80 in a two-week pay period. Also, unions may negotiate with employers for additional compensation beyond federal and state mandates. Employers should be familiar with the federal and state laws (as well as any exceptions) and union contracts, if applicable, that control their industry and workplace.
In Part IV of this article series, we’ll examine the definition and criteria for “paid time” as established by the FLSA.
About the Author
Dr. Gary Deel is a Faculty Director with the School of Business at American Public University. He holds a J.D. in Law and a Ph.D. in Hospitality/Business Management. Gary teaches human resources and employment law classes for American Public University, the University of Central Florida, Colorado State University and others.