Understanding overtime laws can feel overwhelming, but getting it right is essential for protecting both your business and your employees. Whether you’re a business owner trying to stay compliant or a worker ensuring your rights are upheld, knowing when overtime must be paid is critical.
In this post, we’re cutting through the confusion to explain exactly when overtime is required, how it’s calculated, and what common mistakes to avoid.
What Exactly Is Overtime?
Under the Fair Labor Standards Act (FLSA), overtime pay is required for non-exempt employees who work more than 40 hours in a workweek. The law mandates that these employees be paid time and a half—1.5 times their regular hourly wage—for every hour worked over that 40-hour threshold.
Example: If an employee earns $20/hour, overtime must be paid at $30/hour.
Keep in mind that some states have stricter requirements than federal law, which we’ll discuss shortly.
Defining the “Workweek”
A workweek doesn’t need to align with the calendar. It can be any fixed, recurring 7-day (168-hour) period. For instance, your business might operate Monday to Sunday, or Wednesday to Tuesday. The key is consistency.
Important: You cannot alter your workweek to sidestep overtime obligations.
Exempt vs. Non-Exempt Employees
Not all employees are entitled to overtime pay. The FLSA divides employees into two categories:
Non-Exempt Employees
These employees must be paid overtime for any hours over 40 in a week.
Exempt Employees
These employees are not entitled to overtime—but the exemption isn’t based on job titles or salary alone.
To qualify as exempt, an employee must:
- Be paid on a salary basis
- Earn at least $684 per week (federal standard)
- Perform executive, administrative, or professional duties as defined by the Department of Labor
Misclassifying employees is a common and costly mistake. Just calling someone a “manager” or paying a salary does not automatically make them exempt.
Common Mistakes to Avoid
- Not Tracking Hours Properly
Even salaried non-exempt employees must have their hours tracked. Use reliable tools to monitor time worked daily. - Assuming Overtime Can Be Waived
Employees cannot waive their legal right to overtime—not even in writing. Verbal or written agreements don’t override federal law. - Offering Comp Time Instead of Overtime
Private-sector employers must pay overtime in wages, not compensatory time off. - Averaging Hours Over Two Weeks
Overtime must be calculated weekly. If an employee works 45 hours one week and 35 the next, you must pay 5 hours of overtime—even if the biweekly total is 80. - Leaving Out Bonuses or Commissions
Overtime pay must include certain nondiscretionary bonuses and commissions in the regular rate of pay.
Discretionary bonuses (e.g., a holiday gift not tied to performance) are usually excluded.
State Laws May Differ
Some states have their own rules—often more generous than federal guidelines. A few examples:
- California, Alaska, Nevada: Require overtime after 8 hours in a day
- California: Requires overtime on the 7th consecutive day worked
- Colorado: Requires overtime after 12 hours in a day
- Oregon (Manufacturing Only): Requires overtime after 10 hours a day
And some states mandate double time after 12 hours of work in one day.
Always check with your state labor department or a trusted HR consultant for local requirements.
Protecting Employee Rights (And Your Business)
Employees have the right to request overtime pay without fear of retaliation. If an employee believes they were misclassified or underpaid, they can file a complaint with the U.S. Department of Labor or your state’s labor board.
Many employees keep personal records—like timecards, emails, and pay stubs—that can be used in wage disputes. As an employer, your records must be accurate and complete.
Final Thoughts
Properly understanding and following overtime laws isn’t just about avoiding penalties—it’s about creating a fair, transparent, and legally sound work environment. When you stay compliant, you:
- Protect your business from costly lawsuits
- Build trust with your employees
- Foster a positive workplace culture
If you have questions regarding how overtime needs to be handled in your specific situation, reach out to us at 310-534-5577 or contact@abandp.com. We’re here to help!
