The Fair Labor Standards Act (FLSA) sets the guidelines for overtime pay requirements. Generally, when an employer permits or requires an employee to work overtime, they are obligated to pay the employee for the overtime work. Employees that fall under the FLSA must receive overtime pay for hours worked in excess of 40 hours. The FLSA does not require overtime pay for hours worked on weekends or holidays.
There is no set limit specified in the FLSA on the number of hours to work in any workweek. However, different workweeks can be formed for employees or groups of employees. The overtime requirement cannot be waived by agreement between employer and employees. Furthermore, an employer cannot block an employee from working overtime and cannot require an advance authorization for any work done overtime.
The employer cannot refuse to pay for any work done overtime if it falls under the FLSA; the employees have a right to compensation that they worked for. Overtime pay must be calculated on the basis of the average hourly rate derived from the earnings worked for during the workweek. Earnings may be based on a piece-rate, salary or commission.
In order to prevent injustices regarding wages and work conditions, each state sets its own standards and rules for them. The federal minimum wage set by the FLSA is currently $7.25 per hour. However, each state has set their own minimum wage laws and the employee is entitled to receive the higher one depending on federal or state.
Some local cities and counties have “living wage” laws that set a higher minimum wage. These laws apply to the companies that are contracting to do business in the local area or government. In this case, the employer must pay the highest minimum wage whether its federal, state or local. Although minimum wage determines the hourly rate, employers do not need to pay employees by the hour. As long as the total amount paid divided by the total number of hours worked is equal to at least the minimum wage it is legally compatible.
However, not all employers need to pay the minimum wage. There are two requirements set forth in order for the employer to pay its employees minimum wage. First, under the FLSA, your business must receive $500,000 or more in annual sales. Second, if your employees work in “interstate commerce” which generally means doing business between the states.
Furthermore, the following are employees that are exempt from receiving federal minimum wage:
- Independent contractors;
- Outside salesperson;
- Workers on small farms;
- Switchboard operators employed by phone companies with no more than 750 stations;
- Workers of seasonal amusement or recreational business;
- Employees of local newspapers that have a circulation of less than 4,000;
- Newspaper deliveries; and
- Students and learners defined by law.
Employees may still be covered under the state or local laws if not federal. Therefore, it is useful to do more research on them in the local state to determine if the employee is exempt from minimum wage. For employees who earn tips the minimum wage guidelines can vary. The federal law allows for employers to pay a different hourly rate to those employees regularly receiving tips. However, these tips must be enough to meet minimum wage requirements.
If your employer is covered under the FLSA or the local state’s overtime law, all employees are entitled to overtime pay, unless an exception applies. These following workers are exempt and therefore cannot receive overtime:
- White collar jobs such as executive, administrative and professional that based on a salary;
- Independent contractors;
- Volunteer workers;
- Outside sales personnel;
- Certain computer specialists;
- Workers of amusement parks or county fairs;
- Employees of organized camps or religious conference centers;
- Employees of certain small newspaper;
- Newspaper deliverers;
- Workers in fishing operations;
- Babysitters; and
- Criminal investigators.
The United States Department of Labor (DOL) issued new policies regarding overtime pay effective as of January 1, 2020. These policies will help more than a million Americans receive overtime pay. One of the major changes included increasing the minimum salary requirement for FLSA overtime exemptions. It also increased the annual compensation requirement and allow employers to use the nondiscretionary bonuses or incentive payments to satisfy the required salary standard for exempt executive, administrative and professional employees.
Lastly, it altered the special salary levels for workers in US territories and motion picture industries. However, laws vary from state to state, therefore it is useful to research the local applicable guidelines for overtime pay and minimum wage.
If your an employee it’s important to be aware of the rights regarding overtime pay and minimum wage. As an employer, it’s important to ensure you are complying with the applicable federal, state or local laws. Therefore, it may be useful to seek out an employment lawyer for further guidance.