NFIB

Overtime: Who Gets It?
04/ 21/ 2006
by Beth Gaudio, NFIB Legal Foundation

It’s been more than a year since the U.S. Department of Labor announced major revisions to the Fair Labor Standards Act. The changes aimed to clarify which employees qualify for overtime pay as well as update dated terminology and job descriptions. Even with the new regulations, there is no denying that confusion still exists amongst employers and employees. And as employees’ job responsibilities are often subject to change, it’s a good idea to periodically review their job descriptions, and make sure that they are appropriately classified under the FLSA.

To determine whether or not an employee is eligible for overtime pay, an employer first must classify the employee as “exempt” or “non-exempt.” While many employers assume that an exempt employee is salaried and a non-exempt employee is hourly, this is not always the case. Therefore, when classifying an employee, an employer needs to look at the  job title, pay and specific job duties to determine under which category the employee falls.  

All non-exempt employees must be paid overtime (at a rate of not less than time and one half of their regular rate) for working more than 40 hours in one week (seven days in a row).  An employer may not average out an employee’s hours over a two-week period.  The FLSA permits employees 18 years of age and older to work an unlimited number of hours each week. 

Misclassifying a non-exempt employee as exempt can result in owing an employee expensive overtime pay. The Department of Labor reported that for fiscal year 2003, more than $212 million in back wages was recovered, a 21-percent increase over 2002. 

The chart below briefly summarizes the exempt versus non-exempt categories.

	Non-Exempt	Exempt
Pay	Paid hourly or salaried Must be paid overtime Must be paid at least minimum wage	Paid on a salary basis of at least $455/week (This does not apply to outside sales employees, teachers and employees practicing law or medicine)
Regulations	Covered by FLSA, which sets out the minimum standards to be followed	N/A
Examples	Blue-collar workers Hotel and restaurant employees Police, firefighters and other first-responders	Executives Administrators Professionals Outside sales employees Government employees (must meet separate regulations) Computer employees (must perform certain functions to be considered exempt)
Job duties	Maintenance work Construction Manual labor	Exercises discretion and independent judgment for significant matters Uses advanced knowledge, creativity or artistry Manages the company or two or more employees
Time	Overtime pay required for working more than 40 hours a week	Exempt from paying overtime Must be paid in full, regardless of how many days or hours worked in a week or changes in productivity or quality of work
Allowable Pay Deductions	N/A: Only pay for hours worked	Did not work during a week Absence due to personal reasons other than sickness or disability To offset amounts received for: Jury duty/witness fee Military pay Infractions of safety rules Disciplinary suspension

It’s important to recognize that some states have more stringent labor and overtime laws than the federal laws.  An employer must comply with both federal and state wage and hour laws at all times. Locate your state’s labor laws at: www.dol.gov/esa/contacts/state_of.htm. For further information, and to ensure you are in compliance with federal labor laws, visit: www.dol.gov/.

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