by Lisa Guerin
Learn when an employee is entitled to overtime pay, and how overtime is calculated.
Most employers are required to pay overtime to at least some of their employees. The overtime premium is half of your usual hourly rate. This means you are entitled to “time and a half” — your usual hourly rate plus the 50% overtime premium — for every overtime hour you work.
Not all employees can earn overtime, however. Whether you are entitled to overtime pay depends on your state’s law, your job duties, and how many hours you have worked.
Which Employers Have to Pay Overtime
Although the vast majority of employers have to pay overtime, not all do.
To figure out whether your employer has to pay overtime, first determine whether it’s covered by the federal Fair Labor Standards Act (FLSA), the federal wage and hour law that sets out the overtime rules. Generally, a business is covered by the FLSA if it has $500,000 or more in annual sales.
Even if your employer is smaller, however, it is still covered by the FLSA (and must pay overtime) if it is engaged in what Congress calls “interstate commerce” — that is, it conducts business between states. Interstate commerce covers more than you might think, including making phone calls to or from another state, sending mail out of state, or handling goods that have come from, or will go to, another state.
If your employer is so small or local that it isn’t covered by the FLSA (and this will be a pretty rare occurrence), it still might be covered by your state’s overtime law. Contact your state labor department for details.
Which Employees Are Entitled to Earn Overtime Pay
If an employer is covered by the FLSA, it must pay overtime to all eligible employees unless they fit into an exception to the law. If you fall into one of these categories, you are “exempt” from the federal overtime law, which means you are not entitled to overtime (remember, even if your employer isn’t covered by the FLSA, you may be entitled to overtime under state law):
- executive, administrative, and professional employees who are paid on a salary basis (see below)
- independent contractors
- outside salespeople (employees who customarily and regularly work away from the employer’s business, selling or taking orders to sell goods and services)
- certain computer specialists (such as systems analysts, programmers, and software engineers) who earn at least $27.63 per hour
- employees of seasonal amusement or recreational businesses, such as ski resorts or county fairs
- employees of organized camps, or religious or nonprofit educational conference centers that operate for fewer than seven months a year
- employees of certain small newspapers
- newspaper deliverers
- workers engaged in fishing operations
- employees who work on small farms
- certain switchboard operators
- criminal investigators, and
- casual domestic baby sitters and people who provide companionship to those who are unable to care for themselves (this exception does not apply to those who provide nursing care, or to personal and home care aides who perform a variety of domestic services).
Administrative, Executive, and Professional Employees
Probably the most common — and confusing — exceptions to the overtime laws are for so-called “white collar” workers. Employees whom the law defines as “administrative, executive, or professional” need not be paid overtime.
To fit into one of these exemption categories, you must be paid on a salary basis and must spend most of your time performing job duties that require the use of discretion and independent judgment.
You are paid on a salary basis if you earn at least $455 per week and you receive the same salary every week, regardless of how many hours you work or the quantity or quality of the work you do.
There are a few circumstances in which an employer may pay a salaried worker less than a full salary for a week — for example, if the employee takes a couple of days of paid sick or vacation leave, or takes time off under the Family and Medical Leave Act. Generally, however, if an employer docks an employee’s pay (for taking a personal day or not meeting a sales target, for example), then the employee is not paid on a salary basis and is entitled to overtime.
Not every employee who earns $455 or more per week is exempt from overtime. You must also be performing certain types of work — generally, work that requires an advanced degree, is managerial or supervisory in nature, or requires you to make relatively high-level business decisions. Here are the basic requirements for the administrative, executive, and professional exemptions.
- An administrative employee must perform office or other non-manual work that is directly related to the management or business operations of the employer or its customers, and must exercise discretion and independent judgment regarding significant issues.
- An executive employee’s primary duty must be managing the employer’s enterprise or a recognized division or department of that enterprise; the employee must regularly supervise at least two full-time employees (or the equivalent), and must have the authority to hire and fire or have significant input into hiring and firing decisions.
- A professional employee’s primary duty must either be performing work that requires advanced knowledge in the field of science or learning, of a type that is usually attained through an advanced course of study; or performing work that requires invention, imagination, originality, or talent in a recognized creative or artistic field.
To learn more about these exemptions, visit the Department of Labor’s website.
When Have You Worked Overtime?
Under the FLSA, you have worked overtime if you work more than 40 hours in a week. Some states calculate overtime differently, however. For example, California and a few other states have a daily overtime standard, which makes employees eligible for overtime once they have worked eight hours in a day, even if they don’t work more than 40 hours in a week.
How Overtime Is Calculated
If you have worked overtime hours, you are entitled to the overtime premium for those extra hours. To determine the overtime premium, you must calculate your regular rate of pay. This includes all compensation you receive for your employment, such as wages, commissions, performance-based bonuses and prizes, and shift differentials. It doesn’t include money or items you receive that aren’t intended as part of your compensation, such as expense reimbursements, gifts from your employer (such as a holiday bonus), or the value of employee perks, such as a parking space.
You are entitled to a 50% premium for every overtime hour you work. For those hours, you must be paid time and a half: 150% of your regular rate of pay.
To learn more about overtime pay, and other laws that protect you in the workplace, get Your Rights in the Workplace, by Barbara Kate Repa (Nolo).