overtime

Is Not Paying Overtime Illegal: The Fine Print You Need To Know

The first thing we have to know is what is the federal law’s stand regarding paying employees overtime? If non-exempt employees work more than 40 hours in a week, is it illegal to not pay them? The straight answer is: YES. It is indeed illegal. Legally, every hour of overtime should be paid 1.5x their regular rate, according to the Fair Labor Standards Act (FLSA). An employee is not bound to any limit when it comes to hours worked but any employer is not required to pay overtime wage for work done on Saturdays, Sunday, holidays, or regular days of rest, unless overtime work is needed on those days. 

As per the federal law, if your non-exempt employees end up working overtime even with no approval from you, you are still required to pay them overtime wages.

Overtime wage exemption

For employers, thankfully, there are different reasons that waive you from paying your employees overtime wages such as:

  • Employees paid on a salary basis
  • Employees with a salary of $684 per week, at the very least (white collar exemption)
  • Independent contractors, since they are technically not your employees

While salaried examples are known to be exempt, the employer should take note that if that employee earns less than $648 weekly, you have to pay them for overtime hours worked.

White collar exemptions

 overtime

The criteria to fall under the white collar exemptions are:

  • You need to have a base salary, a predetermined amount of money that stays the same regardless of how much you work.
  • You need to make $455 a week, or $910 and $23,660 pero two weeks and per year, respectively.

If you don’t make less than $455 a week, you are most likely entitled to overtime payments. In this case, it would be illegal for your employer to not pay you for overtime hours worked. On the other hand, if your job meets the criteria above, your overtime pay eligibility largely depends on the work you do.

An executive

Let’s now look into exemptions based on job duties. To start with, let’s touch base on the “executive” classification of exempt workers as per the Fair Labor Standards Act:

  • Does your job include managing the company or any of its departments?
  • Do you supervise and delegate tasks to at least two full-time workers?
  • Do you hold authority or significant influence over employee decisions, such as in the hiring or firing process? 

If you satisfy the criteria above, you are classified as an executive and if you satisfy the salary threshold, your employer does not need to pay you overtime wage. 

An administrator

Now, let’s look into administrative workers.

  • Do you deliver non-manual or office work for the management or business operations of your company?
  • Are you authorized to carry out independent judgment in vital decision-making situations?

If so, you are then classified as an administrator and you are also not entitled to overtime wages.

A professional

Our last white-collar category is the professional.

  • Are you capable of carrying out work requiring “advanced knowledge” in fields such as architecture, medicine, or law?
  • Does your work require more intellectual tasks than manual or routine labor?
  • Do you hold an advanced degree in your field?

If so, you are a professional who isn’t legally owed any overtime pay by your employer. Additionally, there are also working artists who FLSA classified as professionals. 

More exempted occupations

FLSA categorized the following occupations or working environments as exempt jobs:

  • Farms
  • Fishing
  • Movie theaters
  • Small newspapers
  • Seasonal amusement businesses
  • Small television and radio stations

The confusion in who is exempt and who is not is still ongoing and still remains to be a case-to-case basis. But mostly, other than those stated here, U.S. workers are legally entitled to overtime wages.

What happens if an employer doesn’t pay the required overtime pay?

If you don’t pay your non-exempt workers their overtime pay, which is 1.5 times their regular rate per hour, you are at risk of facing some legal penalties. You will not only be liable to pay the unpaid overtime pay to your employee, you will also be liable to pay hefty fines to the state and/or the Department of Labor. Additionally, this will include liquidated damages, civil penalties, and the bill your employee paid for while chasing legal counsel. The worst case is a criminal charge you have to face if you go on not settling the problem. Should the reason behind the overtime pay not being paid is a payroll mistake, simply provide retroactive pay.

Now that we’ve laid it out there, it’s so easy to see why you’re better off paying your employees the required overtime pay!

Some more scenarios examples

 overtime

Scenario #1

For example, you have an employee who is paid $20 per hour with a 40-hour work week. Now, that employee had to work for 12 more hours for a week, delivering service for a total of 52 hours in a week. If the patient is non-exempt and is paid by the hour, you are legally required to pay for those 12 extra hours rendered which is $30 per hour, 1.5 times the regular rate. This is then the computation:

  • ($20 x 40 = $800) + [($20 x 1.5) x 12 hours = $360] = total of $1160

Scenario #2

With the same scenario above but this time the employee works a 4/10 schedule or four 10-hour days, you do not owe him/her overtime pay despite working more than 8 hours per day. This is because he/she did not exceed the 40-hour work week so he/she will be paid the regular $800 weekly rate.

Scenario #3

An exempt employee with a $900 salary weekly rate for 40 hours worked had to work extra 5 hours one week. Since he/she is paid on a salary basis and are exempt with a salary more than $684 a week, that employee is not entitled to receive any overtime pay.

So what counts as overtime?

There are basically two types of overtimes, depending on where you live:

Weekly overtime standard

Most state laws practice this type wherein non-exempt employees are paid for every hour beyond the 40-hour work week without putting in consideration how long they have worked daily. For instance, Ash worked 12 hours on Tuesday, 6 hours on Wednesday and worked 8 hours a day for the rest of the work week. Since his accumulated hours did not exceed 40, he is not eligible for any overtime pay.

Daily overtime standard

In some states, such as California, the daily overtime standard is observed. This simply means that non-exempt workers are paid for every hour worked beyond 8 hours, regardless of the total hours worked the whole week. Let’s say Ash who has the same condition as discussed above will be paid for the 4 extra hours worked on Monday even though his work week did not exceed 40 hours. 

What should an employee do if he/she’s not receiving overtime pay?

 overtime

It would be best to contact the supervisor or the human resources department first. If that does not work, it’s time to consider seeking legal help by contacting an attorney.

Is it legal for employers to force overtime?

Legally, there is no limit as to how much overtime an employee can do and the federal law does not have any issue with it as long as the employee is paid accurately. Thus, yes, an employer can impose overtime. This is especially true in industries that tend to have increasing workloads in certain parts of the year, such as holiday months in retail, warehouses, and logistics.

Keep in mind that the FLSA does not require overtime pay on weekends, holidays, or regular days of rest unless the employee has already reached the 40-hour work week. There is one vital exception to mandatory overtime requirements though: if the forced overtime poses safety issues for workers. An example are pilots or truck drivers who cannot be forced to work for more than the required hours to avoid fatigue and possible accidents.

Mandatory overtime limit

Minors and individuals with disabilities are protected from an open-ended forced overtime. The Americans with Disabilities Act (ADA) allows disabled employees to do overtime work as long as it’s light duty and is 100% safe. A disabled employee should also negotiate and set a certain cutoff as to how long he/she can work overtime. If the employer agrees, a contract should be made. 

What can employers do to lessen unauthorized overtime?

To prevent unauthorized overtime, a solid time-keeping and a stringent overtime policy should be imposed. Employers should take steps to make sure that employees record and report all work time to supervisors. Train managers and supervisors on budgeting and managing overtime. Direct them to monitor time worked to ensure that overtime is not being abused or occurring without authorization.

Mulroy highly recommends implementing an overtime policy which include the following:

  • The limit of authorized overtime work
  • How employees can have their overtime authorized
  • Sanctions if the policy is not observed

Reminders of this policy should be published periodically, conduct frequent audits to ensure you pay more than lip service to these safeguards. Should there be employees that do not observe the policy, employers can penalize them and even terminate them if the act ensures. All incidents should be documented properly.

Yes, an overtime policy is key but it would mean nothing if it’s not implemented properly and consistently. It’s always good business practice to have an overtime policy in place. However, it does not protect the business if the business does not implement the policy or applies it willy-nilly. Another thing is that it should be implemented fairly to everyone.  It’s fine for [them] to have different wages, but it’s not fine if one employee gets preferential treatment.

How to promote compliance with overtime laws?

To ensure, ask yourself the following questions:

  • Are my employees hitting or are close to the overtime threshold?
  • Does increasing their salary slightly turn them into exempt employees?
  • Would an annual bonus push them to go over the threshold?
  • Did I misclassify them?

This is a complex yet very important issue. Employee misclassification is a huge FLSA violation and may cause your company a lot. It would be best to invest in availing legal services to help you with this.

Conclusion

We have broken down the different scenarios and how to properly apply laws regarding overtime pay. There’s no one quick answer as the subject is truly complex. But generally, it is illegal to not pay employees their overtime hours as long as they are lawfully eligible to receive them!