Overtime Pay According to the Fair Labor Standards Act

1. What Is Overtime Pay Under the FLSA?

The Fair Labor Standards Act (FLSA) mandates that non-exempt employees who work more than 40 hours in a workweek must receive overtime pay at a rate of at least 1.5 times their regular hourly wage (also known as “time-and-a-half”).

Example of Overtime Pay Calculation:

An employee earning $20 per hour works 45 hours in one week.
They are entitled to 5 hours of overtime pay at $30 per hour (1.5x their regular rate).

Total Weekly Pay:

Regular Pay (40 hours x $20) = $800
Overtime Pay (5 hours x $30) = $150
Total Earnings = $950

Important: Overtime pay is calculated per workweek, not per pay period. Even if an employee works 30 hours one week and 50 hours the next, they are still entitled to overtime for the 50-hour week.

2. Who Qualifies for Overtime Pay?

Under the FLSA, employees are classified as exempt or non-exempt.

Non-Exempt Employees (Eligible for Overtime)

Most hourly workers and some salaried employees must receive overtime pay if they exceed 40 hours in a workweek.

Exempt Employees (Not Entitled to Overtime)

Certain salaried employees are exempt from overtime pay if they meet the following three conditions:
Salary Basis: They receive a fixed salary regardless of hours worked.
Salary Level: As of 2024, they must earn at least $684 per week ($35,568 per year) to qualify as exempt.
Job Duties: They must perform executive, administrative, or professional tasks as defined by the FLSA.

Common Exempt Positions:

Executives & Managers (e.g., company directors, department heads).
Administrative Professionals (e.g., HR managers, accountants).
Learned Professionals (e.g., lawyers, doctors, engineers).
Outside Sales Employees (who work primarily away from the office).

Misclassifying employees as exempt when they should be non-exempt can result in serious legal consequences and back pay claims.

3. How is Overtime Calculated for Salaried Employees?

While hourly employees have a straightforward overtime calculation, salaried employees who qualify for overtime (non-exempt salaried workers) must have their regular hourly rate determined first.

Overtime Calculation for Salaried Non-Exempt Employees

Determine the Regular Hourly Rate

If a salaried employee earns $800 per week and works 40 hours, their hourly rate = $20/hour.

Calculate Overtime Pay

If they work 45 hours, their overtime rate = $30/hour (1.5x the regular rate).

Total Weekly Pay = (40 x $20) + (5 x $30) = $950.

Common Employer Mistake: Assuming that all salaried employees are exempt. A salaried worker earning less than $684 per week is still entitled to overtime pay.

4. State Overtime Laws vs. Federal Overtime Laws

While the FLSA sets the federal standard, many states have stricter overtime laws. Employers must follow the law that provides the greatest benefit to employees.

Examples of States with Stronger Overtime Laws:

California: Requires overtime after 8 hours in a single workday and double-time after 12 hours.
Alaska: Overtime applies after 8 hours in a day OR 40 hours in a week.
Colorado: Overtime applies after 12 consecutive hours worked in a day.

Employers should check state labor laws to ensure compliance beyond federal FLSA requirements.

5. Common Overtime Violations Employers Must Avoid

Failure to comply with FLSA overtime regulations can lead to wage disputes, lawsuits, and costly penalties. Here are some of the most common violations:

Misclassifying Employees – Labeling non-exempt workers as exempt to avoid overtime pay.
Failing to Track Hours – Not accurately recording time worked, especially for remote or off-the-clock employees.
Forcing “Comp Time” Instead of Overtime – Private-sector employers cannot offer compensatory time (extra time off) instead of paying overtime.
Unpaid Pre/Post-Shift Work – Failing to compensate employees for pre-shift meetings, post-shift reporting, or required job prep.
Delaying Overtime Payments – Employers must pay overtime in the same pay period it was earned.
The Department of Labor aggressively enforces overtime laws—violations can lead to lawsuits and hefty fines.

6. How Employers Can Stay Compliant

To avoid FLSA violations and legal penalties, businesses must implement strong payroll policies and accurate time tracking systems.

Best Practices for Overtime Compliance:

Use a Reliable Timekeeping System – Automate tracking of employee hours to ensure accurate payroll processing.
Review Employee Classifications Annually – Ensure that all exempt vs. non-exempt employees are classified correctly.
Train HR & Managers – Educate leadership on FLSA overtime laws and state-specific requirements.
Pay Overtime on Time – Ensure overtime wages are included in the next paycheck.
Stay Updated on Legal Changes – FLSA regulations change, and state laws may be stricter than federal laws.

Compliance with FLSA overtime rules protects businesses from lawsuits, financial penalties, and damage to their reputation.

Final Thoughts: Overtime Compliance is Essential

Overtime pay is a legal requirement, not a discretionary perk. Under the Fair Labor Standards Act (FLSA), non-exempt employees must receive time-and-a-half pay for hours worked over 40 in a workweek.

Employers who misclassify workers, fail to pay proper overtime, or violate wage laws risk severe legal and financial consequences. To maintain compliance, businesses must:

Understand the difference between exempt and non-exempt employees
Properly calculate overtime for hourly and salaried employees
Follow federal and state overtime laws
Use accurate payroll tracking and reporting systems

By adhering to FLSA overtime regulations, businesses can avoid penalties, foster a positive work environment, and ensure fair compensation for employees.

Are you confident that your company is FLSA-compliant? If not, it’s time to audit your payroll processes today.

Overtime Pay According to the Fair Labor Standards Act (FLSA)