Employers are required to pay qualified nonexempt workers overtime pay at one and a half times their regular wages. The U.S. Department of Labor administers the Fair Labor Standards Act (FLSA), which sets the federal overtime rules. The state may have its own overtime laws, which the state labor department administers.
Under the FLSA, employers are required to pay covered nonexempt employees overtime pay at their overtime rate for work hours exceeding 40 for the work week. A covered nonexempt employee is one who is not exempt from the FLSA overtime pay requirements and works for an FLSA-covered establishment, such as a government agency, hospital, school, or one that earns at least $500,000 annually or conducts interstate commerce.
An exempt employee is one who meets the FLSA wage-and-job-duties exemption test. These employees are excluded from overtime pay requirements under the FLSA. This includes professional, administrative and executive employees and some computer professionals who satisfy FLSA exemption criteria.
A nonexempt employee who has more than 40 hours for the work week due to benefit days taken does not receive overtime. Instead, the employer pays all the hours at her regular pay rate. She must physically work the overtime hours to qualify for time-and-a-half pay.
State overtime laws vary. Some may adopt all aspects of federal law; others may have their own laws, designed to give the employee greater benefits. The state of Louisiana, for example, has no overtime laws of its own and therefore uses the federal overtime laws. California, however, has its own overtime laws, which require time-and-a half wages for work hours exceeding eight and up to 12 for the work day and double-time pay for work hours exceeding 12 in a work day. A state may also have its own list of employees who are exempt from overtime pay. Employers should therefore check with their state labor department for its overtime laws to ensure proper payment.
If both the federal and state overtime laws apply, the employer should use the one that gives the employee the most benefits, such as higher pay. Overtime pay is generally due with the employee’s regular pay on his next regularly scheduled paycheck. If the employee has a considerable amount of overtime wages, the employer can issue it as a separate check to reduce tax withholding – the employer does this at its discretion, since the law does not require it. Though most salaried employees are exempt, some are nonexempt. A salaried nonexempt employee qualifies for overtime pay.
Grace Ferguson has been writing professionally since 2009. With 10 years of experience in employee benefits and payroll administration, Ferguson has written extensively on topics relating to employment and finance. A research writer as well, she has been published in The Sage Encyclopedia and Mission Bell Media.