When most people hear the word “overtime,” they automatically assume it refers to wages paid for any work done over 40 hours in a week by a full-time employee, with an overtime rate of pay of one-and-a-half times the normal hourly rate. While this isn’t exactly incorrect, the truth is a little more complex than that. We break it down for you in detail below.
What is overtime pay?
As described above, overtime does, indeed, refer to the additional compensation owed by employers to eligible employees who have worked more than 40 hours in a week. According to the Department of Labor, a workweek is fixed at 168 hours over seven consecutive 24-hour periods. Interestingly, though, this doesn’t necessarily have to coincide with the calendar week, but can instead begin at any time or day as established between an employer and employee.
Who is eligible for overtime pay?
Eligibility is defined by the current “FairPay” regulations within the Department of Labor. The DOL amped up existing overtime laws in 2014 with the goal of extending rights and protection to some 1.3 million low-wage U.S. workers who had been denied overtime under the Fair Labor Standards Act (FLSA), the same act responsible for the federal minimum wage. Under today’s FairPay rules, workers earning less than $23,660 per year or $455 per week are guaranteed federal overtime protection. The legal jargon for these workers is “non-exempt employees” — so although this term may sound a bit counterintuitive, in reality it means you aren’t excluded from overtime protection. Certain kinds of workers are also automatically eligible for overtime pay under FairPay, regardless of whether they are hourly or minimum wage workers, including: “blue collar” or manual labor workers; police officers, firefighters, paramedics, and other “first responders;” licensed nurses; and paralegals.
Who is exempt from overtime pay?
With the exception of some of the aforementioned professions, most “white collar” professionals are considered exempt from overtime eligibility. The color of one’s collar, so to speak, is determined according to an employee’s specific job duties, and honestly, here’s where it starts to get a little complicated.
According to the Fair Labor Standard Act, workers who are executive, administrative, professional, in outside sales, and some computer employees are classified as exempt. This is determined on a case-by-case basis, and an employee’s job title has no bearing on their overtime eligibility. Traditionally, exempt employees are paid a salary in accordance with an annual rate, and holidays and time off do not affect this salary. Additionally, if an employee who does not fall within one of the specific white-collar nonexempt classifications above earns more than $455 per week or $23,660 per year, then they are considered exempt, regardless of whether they are salaried or not. Confused? We don’t blame you. Check out this handy resource listing exempt employee job duties for some added edification.
Some of these regulations on overtime wages, it should be noted, were subject to significant change under a new FairPay overhaul introduced by the Department of Labor in May 2016. That new law, which was intended to go into effect on December 1, 2016, was ultimately blocked by a federal judge, and the Labor Department must still appeal that decision; but more on that later.
For those who are eligible — how much money do they get?
Businesses in the U.S. legally owe eligible staff overtime pay at a rate of one and a half of times their usual pay rate. Sometimes, you may hear the phrase “normal hourly rate” in relation to overtime; know that this means that specific employee’s normal hourly rate. As defined by the Code of Federal Regulations, an employee’s rate is calculated as such: “The regular hourly rate of pay of an employee is determined by dividing his total remuneration for employment (except statutory exclusions) in any workweek by the total number of hours actually worked by him in that workweek for which such compensation was paid.” (Sidenote — of course the federal law uses male pronouns when referring to an employee; way to be sexist, U.S. government!) This means that hours used for vacation, holidays, and/or sick leave will be deducted from your weekly hours before your eligibility for overtime is determined.
So, what does this actually mean? Shall we look at an example, kids? Let’s say Sarah, a licensed nurse and, in this case, a salaried employee, worked 55 hours last week. Her normal rate is $20 an hour. Therefore, she was paid $800 for having worked 40 hours at her regular $20/hour, plus $450 for her additional 15 hours of overtime work (the equation: $20 x 1.5 x 15 = $450). All in all, that means Sarah made $1,250 last week. Way to go, Sarah! (P.s. Our nurse pal should, per custom, receive her overtime pay on her next upcoming pay day.)
Of course, the above law mandates the minimums for calculating overtime. While your company must legally comply with these minimums, some go above and beyond by choosing to pay employees a higher rate, extending their overtime rule to those who wouldn’t ordinarily qualify, and by having overtime kick in sooner than the 40 hours/week mark. For instance, some employers choose to pay “double time,” or twice an employee’s regular hourly rate, for those who work on holidays; currently, federal law does not actually require that employers pay more than the normal rate on holidays. Additionally, some states have overtime regulations that exceed the minimum mandated by the federal government. To learn if your state falls within this category, head to your state’s labor department website.
What’s the deal with that overtime law revision that was recently postponed? If it does go into effect, will it affect me?
On May 18, 2016, then-president Barack Obama announced a change in overtime law that would affect salaried, white collar workers (meaning, those who were previously exempt) in particular. Obama sought to increase the salary cap that separated non-exempt employees and exempt employees, which would serve to help adjust for wage inflation in recent years. Under this new law, the minimum income would have been raised from $455 a week to $913 a week, meaning that salaried employees earning less than $913 a week or $47,476 a year would also be eligible for overtime wages and protection, in addition to their hourly and part-time worker counterparts. The Department of Labor chose this particular salary threshold to be equal to the 40th-percentile salary for workers in the lowest-wage Census Region, which is the South. Obama also announced the threshold would increase every three years.
Increasing the number of U.S. workers eligible for overtime pay under the FLSA had clearly been on Obama’s mind for some time; in 2014, he signed an executive order directing the Department of Labor to undergo a review of overtime rules. However, the new law — which was scheduled to go into effect on December 1, 2016 — has not yet come to pass. It was suspended by a federal judge in Texas this past November, and the Department of Labor has yet to appeal the suspension.
However, in early May, a Republican House majority passed another bill that also affects overtime regulation. Called the Working Families Flexibility Act, the bill would let employers offer workers paid time off instead of time-and-a-half pay. Critics of the bill call it an attempt to coerce those who work overtime into taking paid time off instead of receiving the extra pay they are due. The Trump administration has come out in support of the bill, and says that President Trump would sign the bill into law, should it be presented to him.
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