Extensive Guide To Overtime Pay Under the Fair Labor Standards Act

Why Is This Important?

The Fair Labor Standards Act (FLSA) mandates that certain employees are paid overtime when they work over 40 hours in a week. This guide will assist employees in determining if they are entitled to overtime, as well as employers trying to determine if they are required by law to pay an employee overtime. The FLSA prescribes stiff penalties for employers who fail to comply with the requirements of the Act and allows very large recoveries to employees who have been deprived of overtime. If an employee proves that he was entitled to overtime pay and the employer did not pay the overtime, the FLSA allows the employee to recover double damages and attorney’s fees. Often the attorney’s fees recovered will be considerably more than the unpaid overtime.

It is important to note that while the FLSA allows for attorney’s fees to be awarded to a prevailing employee in the litigation, it does NOT award attorney’s fees to a prevailing employer. So if the employee prevails in the litigation, he gets attorney’s fees, but if the employer prevails, he will have to pay his own attorney’s fees. Because of this, it is often in the employers best interest to settle the case early on because the alternative of retaining a competent employment attorney to fight the case could easily cost tens of thousands of dollars. But it does not end here. You can count on the employee who recovers a large sum of money to tell his friends from work who will proceed to hire their own employment attorney’s and bring a claim for overtime. Depending on how large the company is, the employer’s exposure to these lawsuits can easily run into the hundreds of thousands of dollars.

Example Of An Overtime Pay Dispute

Lets say an employee is paid $20 an hour and works 10 hours of overtime a week. His employer compensates him at the regular rate of $20 an hour for the 10 hours of overtime instead of the customary time-and-a-half ($30 dollars an hour). After one year of employment, or 48 work weeks, the employee has accumulated $4,800 in unpaid overtime (10 hours per week X 48 weeks X $10 unpaid overtime). The employee obtains an attorney and sues for the unpaid overtime. The FLSA allows for liquidated damages of twice the unpaid overtime, so the employers exposure is now $9,600. The FLSA also allows for attorney’s fees to the employee if he prevails in the litigation. The employee’s attorney will bill at a rate of at least $250 per hour for his time spent on the case. So after working on the case for just one day (8 billable hours), the employer’s financial exposure to the suit increases $2,000. As you can imagine, the money adds up quick.

Is An Employee Entitled To Overtime Pay?

The FLSA provides an exemption from overtime pay for employees employed as executive, administrative, professional, outside sales employees, and certain computer employees. To qualify for exemption, employees generally must meet certain tests regarding their job duties and be paid on a salary basis at not less than $455 per week. Job titles do not determine whether the employee is exempt or not. To clarify, generally an employee IS entitled to overtime unless he or she makes more than $455 per week AND meets the specific job duties and requirements for one of the exemptions set forth below.

1. Executive Exemption

To qualify for the executive employee exemption, all of the following requirements must be met:

(1) The employee’s primary duty must be managing the enterprise, or managing a customarily recognized department or subdivision of the enterprise;
(2) The employee must customarily and regularly direct the work of at least two or more other full-time employees or their equivalent; and
(3) The employee must have the authority to hire or fire other employees, or the employee’s suggestions and recommendations as to the hiring, firing, advancement, promotion or any other change of status of other employees must be given particular weight.

2. Administrative Exemption

To qualify for the administrative employee exemption, all of the following requirements must be met:

(1) The employee’s primary duty must be the performance of office or non-manual work directly related to the management or general business operations of the employer or the employer’s customers; and
(2) The employee’s primary duty includes the exercise of discretion and independent judgment with respect to matters of significance.

3. Professional and Creative Professional Exemption

To qualify for the learned professional employee exemption, all of the following requirements must be met:
(1) The employee’s primary duty must be the performance of work requiring advanced knowledge, defined as work which is predominantly intellectual in character and which includes work requiring the consistent exercise of discretion and judgment;
(2) The advanced knowledge must be in a field of science or learning; and
(3) The advanced knowledge must be customarily acquired by a prolonged course of specialized intellectual instruction.

To qualify for the creative professional employee exemption, the employee’s primary duty must be the performance of work requiring invention, imagination, originality or talent in a recognized field of artistic or creative endeavor.

4. Computer Employee Exemption

To qualify for the computer employee exemption, the following tests must be met:

(1) The employee must be employed as a computer systems analyst, computer programmer, software engineer or other similarly skilled worker in the computer field performing the duties described below;
(2) The employee’s primary duty must consist of 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.
(4) A combination of the aforementioned duties, the performance of which requires the same level of skills.

5. Outside Sales Exemption

To qualify for the outside sales employee exemption, all of the following tests must be met:
(1) The employee’s primary duty must be making sales (as defined in the FLSA), or obtaining orders or contracts for services or for the use of facilities for which a consideration will be paid by the client or customer; and
(2) The employee must be customarily and regularly engaged away from the employer’s place or places of business.

6. Highly Compensated Employee Exemption

Highly compensated employees performing office or non-manual work and paid total annual compensation of $100,000 or more (which must include at least $455 per week paid on a salary or fee basis) are exempt from the FLSA if they customarily and regularly perform at least one of the duties of an exempt executive, administrative or professional employee identified in the standard tests for exemption.

Blue Collar Workers Are Entitled To Overtime Pay

The exemptions provided by the FLSA apply only to “white collar” employees who meet the salary and duties tests set forth in the above regulations. The exemptions do not apply to manual laborers or other “blue collar” workers who perform work involving repetitive operations with their hands, physical skill and energy. FLSA-covered, non-management employees in production, maintenance, construction and similar occupations such as carpenters, electricians, mechanics, plumbers, iron workers, craftsmen, operating engineers, longshoremen, construction workers and laborers are entitled to overtime pay under the FLSA, and are not exempt no matter how highly paid they might be.

Conclusion

As you can see, the requirements of the FLSA can be complex. For employees, knowing your rights can be extremely lucrative, and for employers, failing to understand and follow the law can be financially devastating. This guide is not meant to be comprehensive, and just provides some general information on the overtime requirements of the FLSA so that you can determine whether or not to consult with an attorney. If you are an employee who believes you have been deprived of overtime pay unlawfully, or you are an employer who is not sure if your employees are entitled to overtime, consult with an employment attorney immediately. One of us will be able to help you. Remember, there could easily be an extremely large sum of money at stake.