Wage & Hour Issues: Overtime

Overtime pay is due for hours actually worked over 40. “Hours worked” includes all time during which an employee is required by the employer to be on the employer’s premises or to be on duty, or to be at the prescribed workplace, and all time during which an employee is employed or permitted to work.

This includes time when an employee is required to wait on the premises while no work is provided by the employer. It may also include on-call time, as discussed below.

Time that is paid but not actually worked (i.e., vacation days, holidays, personal days, sick days, etc.) need not be counted as “hours worked” for purposes of calculating overtime.

New Federal Overtime Rules

A two-year odyssey began in 2014 when President Obama signed a presidential memorandum directing the U.S. Department of Labor to update the regulations defining which white collar workers are protected by the Fair Labor Standards Act’s minimum wage and overtime standards.

DOL received over 270,000 comments from interested parties regarding the proposed rule, and on May 18, 2016, Obama and Labor Secretary Thomas Perez announced the publication of the final rule updating the overtime regulations.

While the rule was scheduled to take effect Dec. 1, 2016, it now faces an uncertain future after a federal judge issued an injunction Nov. 22 pending a ruling on the department’s authority to expand the overtime eligibility threshold and the rule’s validity.

As proposed, the rule focuses primarily on updating the salary and compensation levels needed for executive, administrative, and professional workers to be exempt.

It more than doubles the minimum salary threshold required to qualify for one of the white collar exemptions, raising the minimum salary requirement to $913 per week, or $47,476 annually, and establishes a mechanism for automatically updating the salary and compensation levels every three years.

The Labor Department has an extensive list of reference documents posted on its website, including the regulatory text of the final rule, comparisons of the old and new standards, FAQ’s, fact sheets, employer guides, and more.

For now, this new federal salary threshold for exempt status leapfrogs over and far beyond the Connecticut threshold, establishing the federal standard that Connecticut employers must adhere to.

More Information

• DOL Issues Final Overtime Rule
• Business Minute: Federal Overtime Rule Changes

On-Call Time

Hours worked includes all time during which an employee is required to be on call for emergency service at a location designated by the employer, whether or not the employee is actually called upon to work.

When an employee is subject to call for emergency service but is not required to be at a location designated by the employer, but is simply required to keep the employer informed as to the location at which they may be contacted, or when an employee is not specifically subject to call but is contacted by the employer and assigned to duty, working time begins when the employee is notified of their assignment and ends when the employee completes the assignment.

There is no requirement to pay overtime on a daily basis (i.e., over eight hours in a day), weekends or holidays, although a collective bargaining agreement or employer policy may provide otherwise.

Of course, if the employee’s hours worked for the week exceed 40 hours, overtime would be due for the hours worked over 40.

Employees cannot waive their right to be compensated for overtime, nor can they agree to an overtime rate lower than the rate required by law.

Two Pay Rates

If an employee has two different jobs for the same employer at two different pay rates, the employee still must be paid overtime for the hours worked over 40 in the workweek.

The overtime rate must be calculated based on the employee’s average hourly rate.

Here’s how it’s done:

Let’s say the rate of pay for the first job is $15 per hour and the rate for the second job is $10.50 per hour.

In one week the employee works 35 hours at the first job and then comes in on the weekend and works 10 hours at the second job, for a total of 45 hours.

They earned $525 (35 X $15) on the first job plus $105 (10 x $10.50) on the second job for a straight-time total of $630.

But they are still due the extra “half” time for the hours over 40.

Divide the total straight-time pay by the total hours worked to get an average hourly rate of $14 ($630 divided by 45 = $14). The half-time rate is half of that ($14 divided by 2 = $7).

So the employee gets an additional $7 per hour for the five hours he worked over 40, which comes to $35. Add the $35 to the $630 to get the employee’s gross pay for the week: $665.

Compensatory Time

Private employers generally cannot give non-exempt employees compensatory time off in lieu of overtime, unless it is within the same pay week (so that the total hours for the week do not exceed 40).

Exceptions

There are some specific exceptions to overtime pay. The following employees may be exempt from overtime pay requirements:

• Certain agricultural employees
• Executive, administrative, and professional employees (as defined by law)
• Any salesman primarily engaged in selling automobiles
• Any driver or helper where the U.S. Secretary of Transportation has the power to establish qualifications and minimum hours of service
• Any outside salesperson as defined by the Fair Labor Standards Act