Recent changes have been made to the national Fair Labor Standards Act (FLSA) employee overtime guidelines that govern how much individuals are entitled to when they work more than 40 hours in one week. As of January 1, 2020, if you’re an employee earning less than $684 per week or $35,568 per year, you can claim overtime at a higher rate of pay than your standard remuneration package.
This is a significant increase over the previous threshold of $455 per week or $23,660 per year and means more workers are entitled to overtime pay. There are some exceptions, and in individual states, local legislation may affect overtime.
Read on to gain a better understanding of how FLSA overtime works and to discover if you’re exempt or nonexempt.
How Is FLSA Overtime Calculated?
The overtime premium in the United States is 50% of the regular working wage of an employee. Put simply, any time you work over and above 40 hours in a single week is charged as time and a half. So, if you earn $8 per hour, anything over 40 hours is to be charged at $12 per hour. This can’t be worked out as an average over two weeks or more but must relate to hours worked in a single week. A workweek is a consecutive working period of 168 hours, as opposed to a calendar week.
There is a common misconception among the workforce that there is a higher tax rate for overtime. While this is not true, it’s correct that if you work enough overtime, you could feasibly end up in a higher tax bracket. Being in a higher tax bracket isn’t necessarily a bad thing, as higher earnings may offset the extra tax you pay. As with your standard wages, as long as your W-2 is correctly filled in, overtime can be paid in cash.
What Constitutes Working Time?
You must understand the law with regard to what constitutes work time or you could be short-changed. Authorized short breaks, typically lasting between 5-20 minutes, are considered to be compensable work hours that should contribute towards your eligibility for overtime. Meal periods, usually lasting upwards of 30 minutes, are not considered work time and are not compensable.
Training and travel directly related to your job, as well as time spent on calls away from your place of work that would stop you from using the time for yourself, are also considered working time. Be sure to factor this into your calculations and check that your employer is doing the same.
When Is Overtime Not Applicable?
According to the FLSA, holidays, Saturdays and Sundays are not considered to be eligible for automatic overtime payment. Any overtime worked on these days will still be paid at the standard rate of 150% of your typical salary. Some states, such as Rhode Island and Massachusetts, entitle specific retail workers to overtime pay on holidays and Sundays.
In some jobs, overtime is exempt. Exemptions are relevant to office workers making more than $100,000 per year, volunteer workers, independent contractors, some computer specialists and salaried executive, administrative and professional (EAP) employees who meet three criteria.
How Are EAP Exemptions Worked Out?
When the FLSA was introduced in 1938, it included overtime rules and exemptions for EAP employees in the legislation. These have changed significantly over time to account for updated workers’ rights. You can find the most recent criteria that outline if you’re entitled to overtime pay under Section 13 (a) (1) of the FLSA. Exempt EAP employees generally need to meet three criteria:
- The employee must be paid a predetermined salary with fixed, guaranteed working hours. All employees who work for an hourly rate are entitled to overtime.
- They must pass the duties test, which is detailed below.
- The individual must meet the salary test by earning over $35,568 per year or $684 per week.
What Is the Duties Test for EAP Exempt Employees?
To determine whether you’re eligible for an exemption for overtime, the FLSA doesn’t look at job title alone. There are specific responsibilities and duties you must perform as an EAP employee to qualify.
For executive employees, all of the following duties must make up part of your job description to qualify for an exemption:
- Your primary function should be the management of your company or a department or subdivision thereof.
- You must regularly and customarily direct the work of two or more other employees.
- Either hiring and firing employees falls directly into your jurisdiction, or your recommendations contribute towards hiring, firing, promotion or advancement are given significant weight.
If you’re an administrative employee, you’re exempt from FLSA overtime if you’re responsible for both of the following duties:
- Your primary responsibility is performing office or nonmanual work that’s related to the management of the business.
- Your duties include the need to use your personal judgment whether to exercise discretion about sensitive or confidential matters within the business.
As a professional who is exempt from FLSA overtime legislation, you must meet the following criteria:
- Your job includes knowledge at an advanced level in a field of learning or science acquired by an extended course of specialized academic instruction. Alternatively, work requiring creative originality, imagination, invention or talent in a recognized field of artistic endeavor also exempts you from FLSA overtime as a professional.
Does FLSA or State Law Apply?
The FLSA sets minimum standards for overtime; some states go over and above and offer additional rights to employees. If the state and federal law differ, whichever law is most favorable for you as an employee takes precedence. That means, if you’re eligible for overtime under state law but not under federal law, state law will apply.
If you have any further questions about how the FLSA’s overtime legislation might affect your job, connect with our employment solutions team at 330-764-3193.
