From the Labor & Employment Practice.

Employers Questions About FLSA Overtime Requirements Are Answered

March, 2003

The Fair Labor Standards Act (FLSA) was enacted by Congress in 1935. Yet many employers continue to raise questions about the FLSA’s overtime requirements. This article will address some of those questions.

1. May comp time be given in lieu of pay?

NO. Even if an employee asks for comp time rather than pay, unless the employee is in one of the exempt categories (executive, administrative, professional, over-the-road driver, outside sales), the employee must be paid for hours worked in excess of 40 in a work week at a rate not less than time and one-half the employee’s regular rate of pay.

2. Is there any limit on the number of hours that an employee may work in any work week?

NO. There is no limit in the Act on the number of hours employees aged 16 and older may work in any work week.

3. Does the Act require overtime pay for work in excess of eight in a day, on Saturdays, Sundays, holidays, or regular days of rest?

NO. Except where a union contract or prevailing wage agreement requires overtime to be paid for working more than eight hours in a day, Saturdays, Sundays, holidays, or regular days of rest, overtime pay is required by law only for hours worked in excess of 40 hours in a week.

4. Can hours worked be averaged over a two week or longer period?

NO. Even if an employee would ask for his hours to be averaged over a two week period, for example, for his convenience to give him the same amount of pay each week, the Act applies on a single work week basis of 168 hours — seven consecutive 24-hour periods. It need not coincide with the calendar week, but may begin on any day and at any hour of the day. Different work weeks may be established for different employees or groups of employees.

5. Is overtime required for employees working on a piece-rate, salary, commission, or some other basis?

YES, but in all such cases the overtime pay due must be computed on the basis of the average hourly rate derived from such earnings. This is calculated by dividing the total pay for employment (except for the noted statutory exclusions) in any work week by the total number of hours actually worked.

6. Where an employee in a single work week works at two or more different types of work for which different straight-time rates have been established, is the employee entitled to overtime pay if his total hours exceed 40, and, if so, how is the employee’s overtime rate determined?

YES. The employee must be paid at the overtime rate for all hours totaling more than 40. The regular rate for that week would be the weighted average of such rates; that is, the earnings from all such rates are added together and this total is then divided by the total number of hours worked at all jobs..

7. Can an employee be paid a fixed sum for varying amounts of overtime hours?

NO. A lump sum paid for work performed during overtime hours without regard to the number of overtime hours worked does not qualify as an overtime premium even though the amount of money paid is equal to or greater than the sum owed on a per-hour basis. For example, no part of a flat sum of $90 to employees who work overtime on Sunday will qualify as an overtime premium, even though the employees’ straight-time rate is $6.00 an hour and the employees always work less than ten hours on Sunday. Similarly, where an agreement provides for 6 hours pay at $9.00 an hour regardless of the time actually spent for work on a job performed during overtime hours, the entire $54.00 must be included in determining the employees’ regular rate.

8. Can an employee be paid a fixed salary for a work week exceeding 40 hours?

NO. A fixed salary for a regular work week longer than 40 hours does not discharge FLSA statutory obligations. For example, an employee may be hired to work a 45 hour work week for a weekly salary of $300. In this instance the regular rate is obtained by dividing the $300 straight-time salary by 45 hours, resulting in a regular rate of $6.67. The employee is then due additional overtime computed by multiplying the 5 overtime hours by one-half the regular rate of pay ($3.335 x 5 = $16.68).

9. Can an employee waive the right to overtime pay?

NO. The overtime requirement may not be waived by agreement between the employer and employees. An agreement that only eight hours a day or only 40 hours a week will be counted as working time also fails the test of FLSA compliance. An announcement by the employer that no overtime work will be permitted, or that overtime work will not be paid for unless authorized in advance, also will not impair the employee’s right to compensation for compensable overtime hours that are worked.

10. Must salaried employees be paid overtime?

IT DEPENDS ON THEIR JOB DUTIES, NOT THEIR TITLE. Overtime laws say that the job title is irrelevant; it is the actual work duties that control. If those job duties qualify them as “Executive,” “Administrative,” or “Professional,” they are exempt from overtime. For example, managers of a well known restaurant chain, who regularly worked 80-100 hours per week, were not paid overtime because they were called “Managers,” which is typically an executive position and therefore exempt from overtime pay. However, in reality, they spend most of their time waiting tables, cooking and washing dishes. Hence, they recently won an award of $2.86 million for unpaid overtime when a Tennessee court held they had been misclassified as executives.

Note: even if the job duties of an employee qualify him as exempt from the overtime requirement, the employee must be paid on a “salary basis” (often called the “no docking” rule), i.e., a set amount each week regardless of the hours worked, or the employer loses the exemption from owing overtime pay.