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Know the Rules for Overtime Pay

February 12, 2010

Before you create work schedules that include overtime, make sure to completely understand the government’s rules regarding overtime pay. Under the Fair Labor Standards Act (FLSA,) administered by the U.S. Department of Labor’s Wage and Hour Division, hourly employees must be paid overtime at time-and-a-half for working more than 40 hours in a workweek. Overtime pay may not be waived by any agreement between you and your workers.

And over the past several years, the federal government has stepped-up enforcement of wage and hour laws regarding overtime. Particular scrutiny is aimed at thousands of what the Department of Labor considers “low-wage” businesses, such as day care centers, restaurants, janitorial services, health care facilities, motels and temp services. 

Yet many managers of small businesses are confused about the rules of overtime pay. In general, federal wage and hour rules apply to any business with at least two employees and $500,000 in revenues. But there are exceptions as well as state guidelines that may also apply.

One potential pitfall involves salaries for workweeks more than 40 hours. According to the Department of Labor a fixed salary for a regular workweek longer than 40 hours does not eliminate an employer’s obligation to pay overtime. Under Federal rules, however, employers can exempt certain positions from overtime regulations.

 These “white collar” exemptions include executives and professionals who spend at least 80 percent of their time on duties involving their own independent discretion and not structured work. Federal law does not require extra pay for weekend or night work. Nor is there any provision for double-time pay. Both are matters of agreement between you and your employees.

As officials at Paxchex, a payroll firm, note, “Classifying your employees as either exempt or non-exempt is neither exact nor easy.” The decision shouldn’t be based merely on job title or whether someone is hourly or salaried. Instead, use job duties as the main factor. 

Overtime is just one of the many important FLSA topics covered at the Wage and Hour Division’s Web site, http://www.wagehour.dol.gov. You’ll also find valuable information on minimum wages; family and medical leave; definitions of full- and part-time workers, and those whose income includes tips; applicable exemptions; and a guide to applicable state-level requirements. 

To learn more about small business employment issues, contact Lancaster SCORE, Counselors to America’s Small Business. SCORE is a nonprofit association of more than 50 business experts who volunteer as mentors to emerging and existing small businesses. SCORE offers free mentoring, business plan reviews, business roundtables, and low-cost workshops.  Call us at 717-397-3092 or find us online at http://www.scorelancaster.org/

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