Overtime: Who Is Eligible to Receive Overtime Pay?

Do Exceptions Exist to How Overtime Pay Is Handled?

Crew of railroad workers working overtime into the night.
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You've probably heard the term overtime pay, but you may not understand how you end up getting overtime pay, which is time and a half. Time and a half payments from an employer mean that if your regular pay is $10 an hour when you work overtime, you receive $15 an hour. 

Here's what you need to know about overtime.

Who Is Not Eligible for Overtime Pay?

Under the Fair Labor Standards Act (FLSA), employees are divided into two groups: Exempt and nonexempt employees. Exempt employees are salaried and do not receive any overtime pay, regardless of how many hours they work. To receive this classification, these employees' job responsibilities must meet strict standards, including management positions or professional work with a payment threshold. (See the next section.) Otherwise, these employees must also be considered eligible for overtime.

Exempt employees are responsible for the accomplishment of a whole job. The requirements of the job are most frequently learned and negotiated through goal setting, performance development planning, and the organization's performance management process. Their requirements fit within the strategic planning framework for the organization.

At what pay rate is overtime paid to salaried employees?

Effective on January 1, 2020, according to the DOL, "the earnings thresholds necessary to exempt executive, administrative and professional employees from the Fair Labor Standards Act’s (FLSA) minimum wage and overtime pay requirements, and allows employers to count a portion of certain bonuses/commissions towards meeting the salary level."

The DOL updated both the minimum weekly standard salary level and the total annual compensation requirement for “highly compensated employees” to reflect growth since 2004 in wages and salaries.

These final rules have the following impact.

  • Raised the “standard salary level” from the current salary level of $455 per week to $684 per week. (Even if classified as an exempt employee, if the person makes up to $35,568 per year for a full-year worker, they are eligible to receive overtime pay.)
  • Raised the total annual compensation requirement for an employee who is classified as a “highly compensated employee” from the current level of $100,000 per year to $107,432 per year.
  • Allowed nondiscretionary bonuses and incentive payments (including commissions) that employers pay at least annually, satisfy up to 10% of the standard salary level, in recognition of the tends toward merit pay and other evolving pay practices.
  • Revised "the special salary levels for workers in U.S. territories and the motion picture industry."

How is overtime calculated for employees?

All other employees are classified as nonexempt which means that they are subject to the Fair Labor Standards Act and are eligible for overtime pay. Overtime pay begins when an employee works more than 40 hours in one workweek, and more than 8 hours in one day in some states (Alaska, California, Nevada, Puerto Rico, and the Virgin Islands) or 12 hours in Colorado, according to the Society of Human Resource Management. Additionally, Oregon requires overtime pay for people in manufacturing establishments who work over 10 hours a day. 

Stay in touch with the equivalent of the Department of Labor in your state or jurisdiction to make certain that your overtime decisions are lawful.

In all but these six referenced jurisdictions, overtime is calculated only on a weekly basis. So, an employee who works 10 hours on Monday and seven hours a day for the next four days are not considered to have worked overtime for purposes of pay in states that keep the 40 hours standard.

Additionally, what is considered a workweek may be defined by the employer as any consecutive seven days, with each day consisting of a 24 hour time period. While most businesses operate on a calendar week, if a business wants to run Wednesday to Tuesday for their pay period, they can.

At what pay rate is overtime paid?

Overtime pay is paid to employees who are covered by the FLSA. They must receive pay for hours worked over 40 hours in a workweek at a rate not less than one and one-half their regular rate of pay. 

Employers may choose to pay more than this in overtime pay, but legally, they are not required to pay more.

Can you waive your right to overtime pay?

The answer to this question is no. Let's take an extreme example. You work all day on a spreadsheet and neglect to save your work as you go along. At 4:30, a power outage occurs and you lose all of your work. This is clearly your fault and your boss is furious with you for not saving the spreadsheet as you worked.

The meeting is tomorrow morning at 8:00 a.m. In order to finish the document, you'll have to stay at least five hours late, putting your time at 45 hours for the week. Your company is still required to pay you overtime for those five hours, even though the reason for the overtime is 100% your fault. They can certainly fire you, but not until they've paid you. the overtime you've earned.

What about comp time?

In the above scenario, one other option exists and that's comp time. If you stay five hours late on Thursday to finish the project, your boss can give you comp time in lieu of overtime as long as he does it in the same workweek. So, if you only work three hours on Friday, and your total hours don't go over 40, that is a possible solution to avoid the overtime payment.

What is not possible is that you work 45 hours in one workweek and only 35 hours in the next to avoid the overtime payment. That is illegal for private businesses. It doesn't matter if the employee consents to this handling of overtime hours or not. Under FLSA, manipulating hours to avoid paying for overtime is illegal.

Nonexempt employees cannot work for free either. They must be paid for all hours worked, regardless of whose idea it was to have the employee work extra hours. This is also why you need to exercise caution in any situation where you may have an hourly employee working remotely. They still need to record all hours worked and receive overtime pay for the hours worked in excess of the legal maximum.

Are there any exceptions to paying for overtime?

According to the Department of Labor (DOL), some exceptions to these overtime rules apply, under special circumstances, to police and firefighters and to employees of hospitals and nursing homes. If these jobs exist in your workplace, you will want to check further about overtime with the DOL.

All states are subject to the federal minimums, but your state may be more restrictive. If you're making decisions for your business, double-check with your employment attorney. You don't want to accidentally violate the FLSA regulations.

What about paying double time for overtime employees?

Double time pay is when an employer pays an employee twice their hourly rate of pay. For example, an employee who is typically paid $14 an hour is paid. $28 an hour. According to the DOL, employers have no requirement to pay double-time pay to employees. But, double-time may be negotiated in an employment contract.

State laws may require overtime or double-time pay, though. In California, for example, employers must pay double time for all hours worked over 12 in any workday. They must also pay double time for all hours worked over eight on the seventh consecutive day of work in a workweek.

Check with your state DOL to understand the specific rules for your location.

However, certain instances exist where an employer might want to pay employees double-time pay as a goodwill gesture to employees. Two that immediately come to mind are when an employee works on a holiday or when an employee must miss a company-sponsored event because the employee has to work.

The Bottom Line

Overtime rules are fairly straightforward if you stay in touch with your state DOL to ensure that you are properly compensating your employees.

Please note that the information provided, while authoritative, is not guaranteed for accuracy and legality. The site is read by a world-wide audience and ​employment laws and regulations vary from state to state and country to country. Please seek legal assistance, or assistance from State, Federal, or International governmental resources, to make certain your legal interpretation and decisions are correct for your location. This information is for guidance, ideas, and assistance.

Article Sources

  1. U.S. Department of Labor. "Overtime Pay." Accessed Jan. 6, 2020.

  2. U.S. Department of Labor: Wage and Hour Division. "Final Rule: Overtime Update." Accessed Jan. 6, 2020.

  3. U.S. Department of Labor: Wage and Hour Division. "Fact Sheet: Final Rule to Update the Regulations Defining and Delimiting the Exemptions for Executive, Administrative, and Professional Employees." Accessed Jan. 6, 2020.

  4. SHRM. "Which states have daily overtime pay laws?" Accessed Jan 6, 2020.

  5. U.S. Department of Labor. "State Labor Offices." Accessed Jan. 6, 2020.

  6. U.S. Department of Labor. "Highlights of the Final Rule on Overtime Eligibility for White Collar Employees." Accessed Jan. 8, 2020.

  7. U.S. Department of Labor. "Overtime Pay: Fact Sheets." Accessed Jan. 7, 2020.

  8. U.S. Department of Labor elaws. "Fair Labor Standards Act Advisor." Accessed Jan. 8, 2020.

  9. State of California: Department of Industrial Relations. "Overtime." Accessed Jan. 8, 2020.