NFIB

Common Misconceptions About Overtime
11/ 27/ 2002

by Charles R. McConnell

Although most people who supervise the work of others are aware of the basic rule governing the payment of overtime for nonexempt (that is, hourly) employees--one and one-half times the person's regular hourly rate for all hours in excess of 40 in a week--many harbor one or more common misconceptions about overtime. Some of the most frequently encountered misconceptions are briefly reviewed as follows:

Misconception: Unless overtime is specifically authorized, the employee is not entitled to overtime pay. The fact is that all work in excess of 40 hours in a week, even that done on the employee's own initiative, counts toward overtime. That's right--an employer can be held liable for even the 10, 15 or 20 minutes here and there of so-called "casual overtime" created when an employee clocks in early or clocks out late. The solution is to have--and reasonably enforce--a policy specifying, for example, that one is to clock in within six minutes before the start of the shift and clock out within six minutes following the end of the shift (many payroll systems calculate in tenths of an hour, so a six-minute threshold is not uncommon). Then someone who consistently punches in early or out late can be dealt with under the policy.

Misconception: An employee can voluntarily give up the right to overtime pay. Say a conscientious employee wants to work an additional hour or two to finish up an important task, choosing to provide this extra effort without expecting compensation. This can't legally be done; under the Fair Labor Standards Act (FLSA) and most state's labor laws, a nonexempt employee is not permitted to waive the right to overtime pay (the reason being that employees could conceivably be coerced into "volunteering" their services at times).

Misconception: All workers who are "salaried" (rather than hourly) don't have to be paid overtime. Decidedly not so. Workers who qualify as "exempt" (meaning exempt from the overtime pay provisions of the FLSA) must qualify under the law as professional, executive or administrative employees. Qualifying requires passing a test or series of tests that look at the responsibilities of the position, the kinds of tasks done, the amount of time spent on routine work, and the extent to which the person must exercise "discretion and judgment" (a phase appearing several times in FLSA provisions).

Because of this misconception more than a few employers have experienced audits by the Department of Labor (DOL). A DOL audit can be a random event but it's usually the result of an employee complaint (the auditors won't tell you which). One of the more common complaints involves overtime as determined by an employee's status as either exempt or nonexempt. One particular practice that's caused trouble for many businesses involves reclassifying certain secretaries as salaried and thus exempt by raising their pay to the FLSA minimum level for administrators and giving them titles such as administrative assistant. But when the DOL decides these positions don't measure up to FLSA requirements, especially concerning the "exercise of discretion and judgment," the employer is held liable for back overtime pay and sometimes penalties as well.

Misconception: Work that's accomplished "off the clock," or outside of regular working hours, doesn't count in calculating overtime. In reality all time worked counts toward overtime, with "worked" including the likes of changing into and out of required clothing or protective equipment, caring for equipment before or after a regular shift, and attending required meetings or educational sessions on what is normally non-work time. Whatever the activity, it counts toward overtime for nonexempt employees if it's required by the employer.

Misconception: The employer can't require overtime if an individual chooses not to accept it, and a worker can't be disciplined for consistently refusing overtime. Wrong. Mandatory overtime is consistent with FLSA and with most state labor laws. Overtime can indeed be required of employees, but it's to the advantage of the business to have a rational process for rotating or apportioning overtime and to ensure that mandated overtime doesn't become excessive.

For answers to other questions about overtime and for other information about the Fair Labor Standards Act, visit the Web site of the United States Department of Labor at www.dol.gov.

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