Two areas have been in the news relating to overtime pay for employees.
The first area deals with the “fluctuating workweek”. The Fair Labor Standards Act (FLSA) requires that employees that are not qualified as exempt (usually called “non-exempt employees”) from overtime receive one & one-half times their regular rate of pay for any hours worked in excess of 40 in a workweek. This general rule applies to hourly employees and to salaried, non-exempt employees, such as clerical or certain administrative employees. The area of exempt vs. non-exempt is fairly complicated and information about these classification can be found by clicking on this link. If an employer makes a mistake in classifying an employee as exempt and does not pay overtime, the employer would owe the employee back pay at a rate of 150 percent of the employee’s regular rate for the overtime hours worked.
The fluctuating workweek exception (FWE) may apply to salaried, non-exempt employees but not to hourly employees. The key to whether or not the FWE may be utilized is the actual agreement between the employee and employer. The bottom line is whether or not there was an agreement made between the employer/employee before the method was utilized. The agreement does not have to be written and can be proven by statements or actions of the parties. The importance of the FWE is that if there is an agreement that the salary paid is intended to cover all hours worked by the employee during the workweek, then any hours worked over 40 in the week will be compensated as overtime by payment of an additional 50% of the weekly rate (instead of 150%) for each overtime hour worked (calculated by dividing the number of hours actually worked in the subject week by the salary amount for the week). An example would be if the weekly salary was $1,000 and the employee worked 50 hours during the week, the overtime would amount to $100 ($1000/50 hrs.= $20/hr; 50% of $20= $10/hr overtime rate; $10 x 10 hrs= $100 overtime pay). Here and here are postings by a law firm blog discussing in more detail and criticism of certain court rulings concerning the FWE.
The second important overtime area is one that will not be effective until January 1, 2015. This area involves home care employees. At present, home care companies can compensate their home care employees utilizing the “companionship” exemption to paying overtime and pay them on a salary basis. The exemption is generally applicable to any employee who provides services for the care, fellowship, and protection of persons who, because of advanced age or infirmity, cannot care for themselves. The exemption covers employees engaged in a wide variety of care jobs of the home bound persons. Under the new rule, the exemption will change and will only apply to individuals employed directlyby the household. Those workers who continue to work through an agency will become hourly workers subject to the duty to pay them overtime for each hour worked over 40 hours during a workweek.