One common misconception employers hold concerning wage and hour laws is that the FLSA’s overtime rule does not apply to salaried employees. When thinking about overtime pay, many people think this only applies to workers who are paid by the hour. But it is important to note that salaried employees can be entitled to overtime pay in some cases. Eligibility for overtime pay is determined by exempt or non-exempt status. For most positions, such status is determined by the form of compensation as well as the nature of the job duties.
It is also important to know that job title alone does not determine eligibility for overtime pay. Eligibility for overtime pay is determined by a worker’s duties and their salary.
In fact, it is believed that 86% of the American workforce is eligible for overtime pay. It is likely that many employees should have received overtime compensation and never did because they and/or their employers were not aware of the laws.
What the Law Says
Under the Fair Labor Standards Act (the “FLSA”), the overtime requirement applies to salaried and hourly employees alike. If an employee is not specifically exempt from overtime provisions, then the employer must pay overtime. It does not matter if the employee is salaried or paid on a piece rate, commission, fee, or daily rate basis.
Salaried employees must receive overtime pay if they work more than 40 hours in a workweek, unless they meet two specific requirements:
- The employee earns a salary exceeding $684 per workweek. (An employer may set any seven consecutive days as the workweek for their organization, e.g., Sunday through Saturday, Monday through Sunday.)
- The employee performs duties satisfying one of the overtime exemptions such as executive, administrative, or professional.
If an employer cannot prove that a worker meets the above criteria, that worker can seek overtime pay that is owed to him or her. Of course, there are a host of other overtime exemptions but the ones mentioned above are the most common and are collectively known as the “white collar exemptions.”
Calculating Overtime Pay & Pay Rates
Unless a state law provides greater protection for the employee, a nonexempt employee who works more than 40 hours in a week must be paid one and one-half times the employee’s regular rate of pay. The regular rate of pay is the employee’s average earnings per hour. For a salaried worker, the regular hourly rate can be calculated by multiplying the monthly salary by 12 months, then dividing by 52 weeks, then dividing by the number of hours the employee must work in a week to earn a full salary.
When more complicated pay rate scenarios apply, such as the inclusion of certain bonuses in regular pay rates, the calculation for overtime pay rate becomes more complex. The Texas Fiscal Management Division has more information on these calculations.
Private employers must compensate employees for overtime hours worked with overtime pay. Certain employees of Texas state agencies may, as an alternative, receive compensatory time off at a rate of 1.5 hours for every hour of overtime worked.
Use Caution When Classifying Employees
Be careful to apply the appropriate classification to your employees, based on the above criteria. Misclassifying a non-exempt worker as exempt can result in your company owing retroactive overtime pay and fines for FLSA violations. Take the time to understand the overtime exemptions and be sure you are applying them correctly.
Contact Our Frisco Employment Law Attorneys Today
As an employer, you may be surprised by what the law says about overtime. If you have salaried employees or employees paid in other ways besides an hourly wage, make sure your employees are being paid fairly.
A wage issue could leave you facing a lawsuit from employees. The Frisco employment lawyers at Simon Paschal PLLC can guide small and large businesses on the ins and outs of wage and hour laws and other employment issues. Call (972) 893-9340 or contact us today to schedule a consultation.
