Overtime Pay Calculations

Under the Fair Labor Standards Act (“FLSA”), overtime compensation generally must be paid to covered employees (employees who do not qualify for an FLSA exemption) at a rate of at least one and one-half times their regular rate of pay for each hour worked in excess of 40 hours per workweek. Some states have additional state-specific overtime laws. For example, California state law requires that employees be paid at a rate of at least one and one-half times their regularly hourly rate of pay for hours worked over eight per day, and double their regular rate of pay for hours worked over twelve per day. Additional overtime recovery may be available under California overtime laws in other limited circumstanced as well. In addition, a covered employee’s regular rate of pay must be equal to or greater than the federal minimum wage. In most circumstances, overtime pay earned in a particular workweek must be paid on the regular pay day for the pay period in which the overtime wages were earned.

At your employer’s discretion, your workweek may begin on any day of the week and at any hour of the day. However, your workweek must be a fixed and regularly recurring period of seven consecutive 24-hour periods. Therefore, your employer cannot average your hours worked over two or more weeks to determine your hours worked per workweek.

In addition, under the FLSA, your employer is supposed to maintain records of the time you spend performing compensable work activities. If you bring an overtime claim against your employer, but your employer has failed to maintain the required records, you are entitled to recover overtime compensation based on a good faith (reasonable and realistic) estimate of the time you worked over the past 2 to 3 years for your employer.

A. Employees Paid by the Hour

If you are paid by the hour, your employer must pay you at least one and one-half times your regular hourly rate for each hour worked over forty hours per workweek.

B. Employees Paid on a Piecework Basis

If you are paid on a piecework basis, your regular rate of pay is obtained by dividing your total weekly earnings by the total number of hours you work in a particular workweek. You are typically entitled to an additional one-half times your regular rate of pay for each hour you work over forty hours per workweek, plus full piecework earnings.

C. Employees Paid a Salary for a Regular or Specified Number of Hours

If you are paid a salary for a regular or specified number of hours per workweek, your regular rate of pay is obtained by dividing your salary by the number of hours your salary is intended to compensate. If you do not meet any of the exemptions from receiving overtime pay, you may be entitled to an additional one-half times your regular rate of pay for each hour you work over 40 per workweek, plus your salary.

D. Weekend and Holiday Work

Under the FLSA, you are not entitled to an overtime premium solely because you perform work on a weekend or holiday. However, if this weekend or holiday work results in overtime hours worked in the workweek, you may be entitled to overtime pay.

E. Overtime Pay May Not Be Waived

The FLSA’s overtime requirement cannot be waived by agreement between you and your employer. As a result, if you reached an agreement with your employer to be paid a certain way, and it turns out that your pay structure and job responsibilities do not fall under any of the exemptions in the overtime laws, you may still be eligible to recover overtime pay for your overtime hours worked. Employers routinely misclassify their employees as exempt, paying them on a salary, or a salary plus commission basis, without properly analyzing whether these employees fit the legal definitions of who may be exempt from receiving overtime pay. An announcement by your employer that no overtime work will be permitted, or that overtime work will not be paid unless it is authorized in advance, will not impair your right to compensation for compensable overtime hours worked.

Misclassification as Exempt

Under the federal Fair Labor Standards Act (“FLSA”) some employees are “exempt” from receiving (or, in other words, are not entitled to) overtime pay.

However, unless you qualify for one of the overtime exemptions, it is likely your employer should be paying you one-and-one half times your regular rate of pay for any hours you work in excess of forty hours per workweek. If you work more than forty hours per workweek but do not receive overtime pay, and you do not qualify for any of the following exemptions, you may be misclassified and could be entitled to up to three years of unpaid overtime, plus additional compensation.

A. Executive Exemption

To qualify for the FLSA’s executive exemption, you must meet all four parts of the following test:

• You must be compensated on a salary basis at a rate not less than $455 per week.
• Your primary duty must be managing the enterprise, or managing a customarily recognized department or subdivision of the enterprise.
• You must customarily and regularly direct the work of at least two or more full-time employees or their equivalent.
• You must have authority to hire or fire other employees, or your suggestions and recommendations as to hiring, firing, advancement, promotion or any other change of status of other employees must be given particular weight.

Employers often misclassify workers as exempt under the executive exemption who may manage another employee, but do not manage at least 80 labor hours worked by other employees each week (or the equivalent of two full time employees or four part-time (20 hour per week) employees.

If your employer has classified you as exempt from the FLSA’s overtime requirement under the executive exemption, but you do not meet all four requirements above, you may be misclassified and could be entitled to up to three years of unpaid overtime, plus additional compensation.

B. Administrative Exemption

To qualify for the FLSA’s administrative exemption, you must meet all three parts of the following test:

• You must be compensated on a salary basis at a rate not less than $455 per week.
• Your primary duty must be the performance of office or non-manual work directly related to the management or general business operations of your employer or your employer’s customers.
• Your primary duty must include the exercise of discretion and independent judgment with respect to matters of significance.

Employers often misclassify workers as exempt under the administrative exemption who may be doing office-type work, but those responsibilities do not necessarily related to managing the business or are not related to the company’s business operations. These employees typically are not exempt under the administrative exemption. Moreover, if an employee’s primary duty is sales, the law provides that they generally are not exempt under the administrative exemption.

If your employer has classified you as exempt from the FLSA’s overtime requirement under the administrative exemption, but you do not meet all three requirements above, you may be misclassified and could be entitled to up to three years of unpaid overtime, plus additional compensation.

C. Professional Exemption

There are two types of professional exemptions under the FLSA: (1) the learned professional exemption; and (2) the creative professional exemption.

To qualify for the FLSA’s learned professional exemption, you must meet all three parts of the following test:

• You must be compensated on a salary basis at a rate not less than $455 per week.
• Your primary duty must be the performance of work requiring advanced knowledge, defined as work which is predominately intellectual in character and which includes work requiring the consistent exercise of discretion and judgment.
• The advanced knowledge must be in a field of science or learning.
• The advanced knowledge must be customarily acquired by a prolonged course of specialized intellectual instruction.

If your employer has classified you as exempt from the FLSA’s overtime requirement under the learned professional exemption, but you do not meet all four requirements above, you may be misclassified and could be entitled to up to three years of unpaid overtime, plus additional compensation.

To qualify for the FLSA’s creative professional exemption, you must meet both parts of the following test:

• You must be compensated on a salary basis at a rate not less than $455 per week.
• Your primary duty must be the performance of work requiring invention, imagination, originality or talent in a recognized field of artistic or creative endeavor.

If your employer has classified you as exempt from the FLSA’s overtime requirement under the creative professional exemption, but you do not meet both requirements above, you may be misclassified and could be entitled to up to three years of unpaid overtime, plus additional compensation.

D. Highly Compensated Employees

If you perform office or non-manual work and you are paid a total annual compensation of $100,000 or more, which must include at least $455 per week, you may be exempt from the FLSA’s overtime requirements if you customarily and regularly perform at least one of the duties of an exempt executive, administrative or professional employee, discussed above.

E. Computer Related Exemption

To qualify for the FLSA’s computer related exemption, you must meet all three parts of the following test:

• You must be compensated on a salary basis at a rate not less than $455 per week or be compensated on an hourly basis at a rate not less than $27.63 an hour.
• You must be employed as a computer system analyst, computer programmer, software engineer, or other similarly skilled worker in the computer field.
• Your primary duty must consist of at least one of the following: (1) the application of systems analysis techniques and procedures, including consulting with users, to determine hardware, software or system functional specifications; (2) the design, development, documentation, analysis, creation, testing or modification of computer systems or programs, including prototypes, based on and related to user or system design specifications; (3) the design, documentation, testing, creation or modification of computer programs related to machine operating systems; or (4) a combination of the aforementioned duties.

Employers often misclassify employees engaged in the manufacture or repair of computer hardware and related equipment, or in help desk positions, as exempt. If you are engaged in these activities, and you do not otherwise qualify for a different FLSA exemption, you may be eligible for overtime pay.

If your employer has classified you as exempt from the FLSA’s overtime requirement under a computer related exemption, but you do not meet all three requirements above, you may be misclassified and could be entitled to up to three years of unpaid overtime, plus additional compensation.

F. Outside Sales Exemption

In order to qualify for the FLSA’s outside sales exemption, you must meet both parts of the following test:

• Your primary duty must be making sales or obtaining orders or contracts for services.
• You must be customarily and regularly engaged away from your employer’s place of business.

Unlike many other FLSA exemptions, you need not be paid a certain amount per week to qualify for the outside sales exemption.

Employers often misclassify employees as exempt from overtime pay under the outside sales exemption. They might pay these sales persons on a commissions basis, or a salary plus commissions basis and not pay them any overtime pay for their overtime hours worked (and at times, may deny them minimum wages for each workweek worked). If you are a salesperson who is primarily making sales from inside of the office, it is likely you do not fall under the outside sales exemption to the overtime laws.

If your employer has classified you as exempt from the FLSA’s overtime requirement under the outside sales exemption, but you do not meet both requirements above, you may be misclassified and could be entitled to up to three years of unpaid overtime, plus additional compensation.

G. Retail or Service Establishment Exemption

In order to qualify for the FLSA’s retail or service establishment exemption, you must meet all three parts of the following test:

• You must be employed by a retail or service establishment. Retail and service establishments are defined as establishments 75% of whose annual dollar volume of sales of goods and/or services is not for resale and is recognized as retail sales or services in a particular industry.
• More than half of your total earnings must represent commissions.
• Your total compensation divided by the number of hours you work or your regular hourly rate must be greater than one and one-half times the federal minimum wage.

If your employer has classified you as exempt from the FLSA’s overtime requirement under the retail or service establishment exemption, but you do not meet all three tests above, you may be misclassified and could be entitled to up to three years of unpaid overtime, plus additional wages.

H. Other Fair Labor Standards Act ("FLSA") Exemptions

Although this list is not conclusive, if you qualify for any of the following less common FLSA exemptions, you may not be eligible to receive overtime pay:

• You are employed by a seasonal amusement or recreational establishment.
• You are engaged in fishing operations.
• You deliver newspapers.
• You are a farm worker employed on a small farm.
• You are a casual babysitter.
• You are an auto, truck, trailer, farm implement, boat, or aircraft salesperson employed by a non-manufacturing establishment that is primarily engaged in selling those items to ultimate purchasers.
• You are employed by a railroad or air carrier.
• You are a taxi driver.
• You are a domestic service worker and you reside at your employer’s residence.

I. Changes in Exemption Status

Occasionally, employers may change workers’ exemption status from exempt to non-exempt. This means that employees, who previously did not receive overtime compensation, suddenly become eligible for overtime pay for hours worked moving forward. Employers may make this change for a number of reasons, such as to ensure they comply with wage and labor requirements. If an employer reclassifies an employee, there is a chance that the employee was misclassified to begin with. If this is so, then the employee may be entitled to overtime compensation for overtime hours worked before the reclassification occurred. If your status changed to non-exempt, then you may be able to recover additional overtime compensation for work performed before the reclassification.

Reclassifications are occurring on a widespread basis within the mortgage industry, particularly with loan officers and underwriters. These employees, may be entitled to up to three years of overtime pay for their overtime hours worked, plus additional compensation.

Off-the-Clock Work

If you do not qualify for a Fair Labor Standards Act (“FLSA”) exemption and you are not an independent contractor, you are most likely a “covered” employee. Covered employees must be paid for all hours worked in a workweek, including overtime hours (hours worked over forty per workweek).

In general, “hours worked” includes all time you must be on duty, or on the employer’s premises, or at any other prescribed place of work. It also includes any additional time you are “suffered” or “permitted” to work. Suffer or permit means that if your employer requires or allows you to work, that time is generally hours worked and must be paid. Time spent doing work not requested by an employer, but still allowed, is generally considered hours worked. It is the duty of the employer to see that work is not performed if the employer does not want it performed.

Some common off-the-clock violations are:

• Instructing an hourly employee to clock out of the timekeeping system and continue working.
• Instructing hourly employees to only record a set number of hours worked per day or week, when the employee is working more.
• Paying hourly employees only by their scheduled hours and not their hours actually worked.
• In a call center setting, paying employees only for time spent on the phone and not for time spent on other work related activities, such as booting up their computers and applications and reviewing work related email messages.
• Not paying hourly employees for time spent responding to emails and voicemails while outside of the office, or for other work related activities performed away from the worksite.

Note: An employee cannot typically waive his or her rights under the FLSA by agreement or contract, including what hours must be counted as hours worked.

A. Meal Periods

Under federal law, an employer need not provide meal breaks to its employees. However, many employers do. As a general rule, bona fide meal breaks are not considered hours worked and need not be paid. In general, 30 minutes or more is sufficient to constitute a bona fide meal break. Typically, time spent on a meal break of a shorter duration must be compensated as hours worked. In addition, during a meal break, you must be completely relieved from your job duties. If you are required to perform any job duties while eating, such time most likely constitutes hours worked and must be paid. Several states, including California, have additional laws that require employers to provide certain meal and rest breaks. If such laws are violated, the employer might be liable to the employee for compensation.

B. Rest Breaks

Under federal law, an employer need not provide rest breaks to its employees. However, many employers do. As a general rule, rest breaks, which are generally from 5 to 20 minutes, are considered hours worked and must be paid.

C. Holiday, Vacations and Sick Time

Under federal law, if your employer allows you to take time off for a holiday, a vacation, or because you are sick, the time-off, even though it may be paid, is not hours worked. Therefore, it need not be included in calculating your total hours worked for purposes of determining whether you are owed overtime compensation.

D. Homeworkers

A homeworker is an employee who is employed to perform work from home for his or her employer. Time spent by a homeworker preparing materials, cleaning up work related materials, and traveling to and from the employer’s company to pick up and return finished work, constitutes hours worked. However, normal private pursuits such as eating, sleeping and cleaning by a homeworker typically do not constitute hours worked.

E. Lectures, Meetings and Training Programs

Your attendance at lectures, meetings, training programs and similar activities may or may not be hours worked depending on the particular circumstances.

In general, your attendance at lectures, meetings, training programs and similar activities does not constitute hours worked if all four of the following criteria are met:

• Your attendance is outside of your regular working hours.
• Your attendance is voluntary.
• The course, lecture, or meeting is not directly related to your job.
• You do not perform any productive work for your employer during your attendance.

In addition, the following situations do not constitute hours worked:

• If your employer establishes for the benefit of its employees a program of instruction that is similar to courses offered by independent bona fide institutions of learning, your voluntary attendance at such training courses, outside of your working hours, is not hours worked, even if the courses are directly related to your job or are paid for by your employer.
• If you voluntarily attend an independent school, college or trade school after work hours, the time is not hours worked even if the courses relate to your job position or are paid for by your employer.
• If you spend time in supplemental classroom instructions held in conjunction with an apprenticeship program it most likely does not constitute hours worked.

F. On-Call Time

If you are required to remain on your employer’s premises or so close to your employer’s premises that you cannot use your time effectively for your own purposes, such time may be considered working while “on-call,” and may be compensable time worked. For example, the frequency of call-ins may be so high that you cannot effectively use on-call time for your own purposes. In addition, all time spent responding to calls is hours worked.

G. On Duty Waiting Time

When you are already on duty, but waiting for work to do or for repairs to be made, you are engaged to wait and the time spent waiting is typically considered hours worked. This rule is the same if you work away from your employer’s premises. On duty waiting time is hours worked even though you are allowed to leave the premises or the job site during such periods of inactivity if you are unable to use the time effectively for your own purposes.

H. Off Duty Waiting Time

Unlike on duty waiting time, off duty waiting time is a period of time during which you are waiting to be engaged and is not hours worked if the following four tests are met:

If all four tests are not met, such waiting time is typically considered on duty waiting time and must be paid.

• You are completely relieved from duty.
• The periods of waiting time are long enough to enable you to use the time effectively for your own purposes.
• You are told in advance by your employer that you may leave the job.
• Your employer advises you of the time that you are required to return to work.

I. Show-up Time

If you arrive for work at the time your employer directed you to be there, but you are sent home before you perform any work, such time is typically not considered hours worked and need not be paid.

J. Preliminary and Postliminary Activities

Preliminary activities are activities which you perform before you begin your “principal” work activities. Postliminary activities are activities which you perform after you end your “principal” work activities. Principal activities are activities which you are employed to perform and also include all activities which are an integral (or essential) part of your employer’s business. Your employer must pay you for time spent engaged in principal, integral and essential activities. Depending on the circumstances, time you spend in preliminary and postliminary activities may also be compensable. Generally, walking, riding, or traveling to and from the actual place where you perform the principal activities is not compensable.

K. Regular Home-to-Work Travel

Time you spend traveling from home before the workday and returning to home at the end of the workday is generally not compensable work time. However, if you perform principal activities at home before traveling from home to work, your home to work travel time may be compensable. Similarly, if you perform principal activities at home after returning to home at the end of the workday, your work to home travel time may be compensable.

L. Home-to-work Travel on a Special One Day Assignment in Another City

If you regularly work at a fixed location in one city and you are given a special one day assignment in another city in which you will return home the same day, the time you spend traveling to and returning from the other city is typically compensable work time. However, your employer may deduct the time you would normally spend commuting to your regular work site.

M. Travel That Is All in a Day’s Work

Time you spend traveling as part of your principal activity, such as travel time from job site to job site during the workday, is typically compensable work time.

N. Travel Away from Home Community

Travel that keeps you away from home overnight is considered travel away from your home community. Such travel time may be compensable work time when it cuts across your workday. In addition, such travel time may be compensable work time if it takes place outside of your normal working hours. However, time spent in travel away from your home community outside your regular working hours as a passenger is most likely not considered compensable work time.

O. Comp Time

Compensatory time or "comp time" occurs when an employer allows an employee to receive days off in lieu of overtime compensation. Comp time in lieu of overtime compensation is permitted when you are a governmental employee, and when certain conditions are met. In addition, in some states private employers can give comp time in lieu of overtime compensation.

In general, non-exempt employees working for private employers are eligible for overtime pay during the weeks in which they work overtime. Private employers cannot give comp time to non-exempt employees in lieu of overtime pay and require those employees to use comp time at a later date. Non-exempt employees must be compensated for overtime during the week in which it is worked. In other words, an employee must record all their time worked accurately, and record that time for the actual day worked. If that results in overtime for the workweek, that overtime compensation must be paid. A private employer cannot ask an employee to record their hours worked as being worked on a different day that they were not actually worked.

Independent Contractors

In an effort to cut costs, employers are increasingly classifying workers improperly as “independent contractors.” This classification can deny workers minimum wages, overtime compensation, retirement and/or health benefits, FICA taxes, workers’ compensation, unemployment, and other benefits.

The employer’s use of an income tax form 1099 does not automatically make an individual an independent contractor when it comes to overtime and minimum wage laws. Instead, courts consider several factors to determine whether a worker has been improperly classified as an independent contractor. These factors vary across jurisdictions, but generally include: (1) the degree of control exercised by the employer over the workers; (2) the workers’ opportunity for profit and loss and the workers’ investment into the business; (3) the workers’ investment into tools and materials; (4) the degree of specialized skill and independent initiative required to perform the work; (5) the duration of the working relationship; and (6) the extent to which the work is an integral part of the employer’s business. No one factor is determinative; rather, courts look at all circumstances of a working relationship to determine the proper classification.

Independent contractor misclassifications occur in various industries and job positions. Some areas where these misclassifications have occurred are:

• Cable installers
• Exotic dancers
• People working from home
• Construction workers
• Maintenance/cleaning crews
• Landscaping crews
• Nail salons
• Merchandisers who provide stock
• Drivers
• Staffing agencies
• Healthcare workers/nurses
• Hair stylists
• Nannies
• Start up companies

If you were misclassified as an independent contractor, you may be entitled to up to three years of overtime pay, plus additional compensation.