What Should Employers Know About Overtime?

Overtime can be a point of contention and also confusion between employers and employees.

From how it’s paid to the concept of mandatory overtime, which employers can require their employees to work, it can be tricky to understand what’s allowed and what’s not.

With that in mind, the following are some of the things employers should know about overtime, broadly.

What is Overtime?

Overtime refers to any scenario where you work hours as an employee that go beyond your normally scheduled hours.

As far as federal law, overtime starts to apply after 40 hours. If you work for eight hours a day, five days a week, you work 40 hours a week. If you worked for more than eight hours a day, it could then trigger overtime pay since you’d be going past the 40 hours.

For salaried employees, whether or not they get overtime pay depends on their specific situation. For example, you could be exempt from overtime pay if you earn more than a certain amount each year.

Federal and state laws require most employers to pay overtime, with a premium of 50% of the employee’s typical hourly wage. An employee who works overtime then has to be paid time-and-a-half.

There are a lot of exceptions to overtime laws. If you’re eligible for overtime pay, you’re called nonexempt. If you aren’t eligible, you’re an exempt employee.

Fair Labor Standards Act (FLSA) Rules

The FLSA is a broad, sweeping federal law covering quite a few pivotal aspects of the relationship between an employer and an employee. The law has elements that employees have to be aware of, including overtime pay rules.

It’s estimated that more than 143 people in America have protection by the FLSA, which covers most employees.

For your business to be covered by FLSA, generally, you would have $500,000 or more in yearly sales.

Even if your business is smaller but your employees work in interstate commerce, you may need to pay overtime. The rules for what constitutes interstate commerce are much broader than what you might think. For example, if your employees handle items from another state, you might have to follow FLSA rules.

Even in the rare situation where you have a business so small FLSA rules aren’t applicable, you might still have to pay overtime because of state laws.

The most common exemption to FLSA is called the white-collar exemption. This means that the overtime payment rules don’t apply to executive, administrative and professional employees. The restrictions might not apply to outside sales employees, employees working in some technology-based roles, and employees who are highly compensated.

Calculating Overtime

When an employer is calculating overtime, again, according to FLSA, they have to pay at least one-and-a-half times the regular wage rate for all hours that were worked beyond 40 in a workweek.

The regular wage rate for employees that’s used in the calculation will usually include all the compensation they receive, but there are some exceptions. Bonus pay, for example, is taken into consideration. You have to calculate the total compensation and then divide it by the hours worked during the week to determine the regular wage range.

All compensable time can include the time an employee can’t use for their own purposes and unauthorized work time if you as the employer know about it or benefit from it. Compensable time can also include the time an employee spends preparing for activities, travel time other than standard commuting time, and time spent at job-related training or meetings.

What Is Mandatory Overtime?

Something touched on briefly above is mandatory overtime. Mandatory overtime is also referred to as forced overtime. This means that as an employer, you require employees to work more than a scheduled 40-hour workweek. You can require the extra hours, and you don’t need the approval of your employees.

You can also fire an employee for refusing the overtime you mandate.

Typically, just because they don’t want to, an employee can’t refuse mandatory overtime. There might be a few situations where that’s not true though. First, if the overtime breaches a contract, and second when it could create a health or safety risk. Another time an employee might not have to work mandatory overtime is if they aren’t being paid based on federal and state law.

Finally, if there is a family emergency that’s protected under the Family Medical Leave Act (FMLA), then the employee might not be required to work overtime.

Does that mean that it’s a good idea as an employer to put in place forced overtime? Probably not.

You have to consider that even though it might be technically legal, you could be putting yourself at risk for some adverse outcomes. For example, it could diminish your corporate culture and reduce your employee morale.

Your employees might start to resent you. It can lead to higher levels of stress and fatigue among employees, and an employee can quit and then eventually take legal action against you.

State Overtime Laws

Along with understanding federal laws related to overtime, it’s imperative to have a grasp of state laws where your business is located.

For example, in California, it’s required that you provide double pay for any hours worked over 12 a day or for more than eight hours on the seventh day of the workweek.

In Oregon, you have to pay overtime after 10 hours worked in any day for some manufacturing roles.

In Alaska, if your employee works more than eight hours in one day, you have to pay overtime.

If you’re found to be in violation of overtime laws, for example, if you didn’t pay it at all or didn’t calculate it correctly, you might end up having to pay damages, fines and penalties. You could also face more damages if you broke applicable state laws. If you are unsure of anything, the best thing you can do is talk to an attorney who understands both state and federal labor laws.

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