Who Gets Paid Overtime?
Federal Law: Fair Labor Standards Act
The majority of employees are entitled to overtime pay under the Fair Labor Standards Act. However, genuine managerial or supervisor employees may be exempt (ie not entitled to overtime pay). Regular employees must be paid overtime for each hour they work over 40 in a week.
A common misconception is that all salaried employees are exempt from overtime. This is not true! To be exempt, an employee must meet a specific salary threshold and the employee must be in a genuine managerial position. This typically means that, to be an employee must be paid overtime, unless he or she:
Supervises at least 2 other workers; and
1) Has the power to hire, fire, and make other managerial decisions; and
2) His or her primary job function is management. and
3) The employee is paid at least $455 per week. This threshold will nearly double to $913 per week ($47,476 per year), effective December 1, 2016.
The increase of the base salary threshold later this year will mean that many employees who have not received overtime paying the past will now be entitled to time and a half for hours worked in excess of forty per week.
The salary minimum threshold is only half the picture. the current FLSA salary threshold, many employees do not meet the job duties test and are misclassified as exempt when they are really non-exempt. Meaning the employees are not being paid overtime when the employees should be.
How Much Is At Stake?
The financial burden of enforcing overtime payment sits squarely on employers, not employees. Let’s look at a misclassified employee who makes $50,000 per year. ‘Misclassified’ means that an employee is classified as exempt (and not paid overtime) when he or she should be classified as non-exempt and therefore get paid overtime. A $50,000 annual salary equals $24.04 per hour. Overtime must be paid at 1.5 times the employee’s regular rate of pay (1.5 times $24.04 equals $36.06 per hour). If the employee works 50 hours per week for a year, consider the potential liability of the employer:
• The employee should be paid $36.06 for each overtime hour he or she worked (even if salaried). $36.06 for 10 extra hours per week equals $360.60 per week. $360.60 times 50 weeks per year (allowing 2 vacation weeks) equals $18,030 of unpaid overtime for that one employee.
• If the employer doesn’t pay the overtime and the employee files a claim against the employer, then the employer owes $18,030 in unpaid overtime.
• Under the law, the unpaid overtime amounts can be doubled as a penalty making it now over $36,000 owed by the employer to the employee. Plaintiff’s don’t always get their claims doubled, but employers essentially have to show that the non-payment was due to sincere ignorance or genuine accident. It’s a hard sell.
• If the employee prevails, the employer can also be required to pay the employee’s attorney’s fees, on top of the employer’s own defense costs. Depending on how strenuously the employer disputes the claim, legal fees can even exceed the employee’s claim!
• Once the unpaid overtime gets paid, employers often get assessed governmental fines, penalties, and back taxes owed on the unpaid overtime.
If You Are An Employer:
• Audit each of their employees to make sure they are properly classified as exempt or non-exempt.
• Ensure that they have proper timesheets for any non-exempt employees. The law places the burden on employers to maintain proper records of hours worked and amounts paid.Remember, even salaried employees can be non-exempt and thus their time needs to be documented and overtime paid.
If You Are An Employee:
• Call an employment attorney!
• Get a notebook and document the hours you are actually working, including the date, hours worked (ie 9:00am-7:15pm), and a short note about where you worked or what you did for work that day.
Want To Know More?
Check Out THIS VIDEO from the US Department of Labor about employee overtime rights.