Not paying a few dollars of overtime can end up costing your business thousands of dollars. As such, it is very important for you and your business to understand the Fair Labor Standards Act (“FLSA”) and who is and who is not entitled to overtime pay.
FLSA requires employers pay employees who work more than 40 hours a week overtime pay of at least 1.5X their regular rate. Certain employees are exempt from overtime, however to qualify for the exemption the employee must pass all three of these tests: (i) “salary basis test”, the employee must be paid a salary which is not reduced if the employee works less than 40 hours; (ii) the “salary level test”, the amount of the salary paid must be at least $684 a week; and (iii) the “duties test”, the employee’s job duties must primarily involve executive, administrative, or professional duties as defined by FLSA.
Here are three of the most common misconceptions of FLSA overtime rules:
- “I pay my employees a salary, so I do not have to pay overtime”.
Just because you pay your employee a salary does not mean the employee us exempt from overtime pay. In addition to the salary basis test, the employee must qualify under the “salary level test” and the duties test. Simply paying your entry level worker a salary will not exempt that employee from overtime. - “I don’t have to pay my managers overtime”.
Whether or not an employee qualifies as an executive, administrative, or professional under the duties test is more than just the employee’s title. The employee’s job duties have to match the FLSA description. For example, an executive employee must (i) manage the business or a department or subdivision of the business; (ii) regularly direct the work of at least two or more full-time employees; and (iii) have the authority to hire or fire other employees, or weigh into hiring, firing or advancement of status of other employees. If you have an employee who does not perform (i), (ii), or (iii), then even if they are a “manager”, they would not be exempt from overtime. - “My employees don’t work more than 80 hours in a pay period”.
FLSA assesses overtime on a 40-hour work week, not your business’s standard pay period. So even if you employees are paid on bi-weekly basis, if an employee works 35 hours in week one of the pay period and then 45 hours in week two of the pay period, the employee must be paid time and half for the five hours the employee worked over 40 hours in week two.
At Ser & Associates, we regularly work with clients to help them develop employment policies to ensure their business is in compliance with overtime pay requirements. If you have any questions or concerns about your employment practices, give us a call at 305-222-7282 to schedule a consultation.
Also, please be sure to visit us at www.Ser-Associates.com and follow us on Instagram, Facebook, and/or LinkedIn to learn more about how we can assist you and your business!
