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Federal Overtime Law: 4 Tips For Staying In Compliance

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in FMLA Guidelines,HR Management,Human Resources,Leaders & Managers,Management Training

The Fair Labor Standards Act (FLSA) sets strict rules for how you pay employees, including who can earn overtime pay and how much it must be.

The basic concept is straightforward and the law encourages employers to set reasonable workweek limits. Rather than cap the number of hours employees could legally work in a week, as some European countries did in response to the growing labor movement in the early 20th century, Congress decided to penalize employers who required long hours by making them pay a premium in the form of overtime. That premium is set at 1.5 times the regular hourly rate for any time worked beyond 40 hours per week.

You must pay hourly, nonexempt employees overtime, but you don’t have to pay salaried (exempt) employees anything extra for a longer workweek. That’s because salaried workers—who make up the employees we generally think of as white-collar office workers—work as long as they need to get their jobs done.

On the other hand, employers can’t dock exempt employees for partial-day absences, whereas hourly employees are paid for only the time they actually work.

The FLSA does not put limits on the number of hours that employees 16 and older can work in any workweek. Also, you can require mandatory overtime (subject to the FMLA and sometimes the ADA). The FLSA does not require you to pay employees anything extra simply to work on Saturdays, Sundays, holidays, or regular days of rest. Nor does the FLSA mandate vacations or sick leave.


Lawyers who want to make a quick buck are capitalizing on recent overtime class-actions that have netted millions in unpaid overtime and penalties. In fact, overtime and other unpaid-time lawsuits have become a cottage industry in the 21st century.

What’s more, when people learn that employees at Wal-Mart worked through their lunch and won millions of dollars in overtime, they may just make an appointment with an attorney.

Before you know it, it’s your organization on the receiving end of a huge lawsuit. And a few hours multiplied over two or three years (that’s how long the court can go back—two years for innocent violations and three years
for willful ones) and hundreds of employees can add up quickly.

Don’t forget the double payments the FLSA says underpaid employees also can win.


Prevention truly is better than the cure. Make sure your organization establishes practices and procedures that prevent overtime mistakes. Here are four important tips:

1. Use time clocks. It goes without saying, you must keep accurate records of all time worked by hourly employees. Your best bet is to use a time clock or other electronic time-keeping device. Then, don’t allow managers to override or adjust the recorded time without a good reason and HR approval.

Plus, it doesn’t hurt to track the time of exempt employees, too. The reason? If you misclassified hourly employees as exempt and they sue (another popular collective action today), you’ll have to show exactly how many hours were worked.

If you don’t have records, the court will take the employee’s (inflated) estimate. Just make sure you don’t use those time records to deduct pay for missed time. That may destroy the exempt status for that employee and all others in his or her classification.

2. Don’t allow lunch at the desk. Many lawsuits are triggered by employees working through their unpaid lunch time. That’s why it’s wise to either require employees to clock out for breaks or to find another way to assure they aren’t working when they should be eating lunch or taking a break.

Remember: Answering the phone or greeting a customer is paid time. And if the employee has already worked
40 hours, the extra time is overtime.

3. Don’t base management bonuses on keeping overtime down. It’s just those sorts of incentives that has landed Wal-Mart in trouble.

By tying management bonuses to low overtime costs, some supervisors may be tempted to make employees work off the clock. That keeps productivity up, and overtime down … until your organization is sued for all that extra overtime.

4. Use the U.S. Labor Department overtime calculator. The department’s web site provides a wealth of information on how to comply with the FLSA overtime provisions, including an overtime calculator (see box below).

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