Fair Labor Standards Act
Under the FLSA, “overtime” means “time actually worked beyond a prescribed threshold.” The normal FLSA “work period” is the “work week” — 7 consecutive days — and the normal FLSA overtime threshold is 40 hours per work week. Some jobs may be governed by a different FLSA overtime threshold (Chamberlain, 2003). These will be addressed specifically, below. For present purposes, the discussion will assume employees are regular “40 hour per week” employees.
Time actually worked over 40 hours in a work week is “FLSA overtime.” Note that some jobs may use the word “overtime” differently, as for example to describe “time worked outside of the employee’s normal schedule” or “time worked over 8 hours in a day.” An employer may pay employees on any basis it wishes, provided only that actual pay does not fall below the minimum standards required by the FLSA. It is, therefore, permissible for an employer to use the word “overtime” to mean something different from the definition of “overtime” in the FLSA (Chamberlain, 2003). That, however, does not change the meaning of the word overtime for FLSA purposes, and it is important to restrict the meaning of “overtime” to its statutory definition in determining the FLSA rights of employees. “Time worked outside of normal schedule” may not be the same as “time worked over 40 hours in a work week.” Only the latter is “overtime” under the FLSA, and the FLSA governs only pay due for “FLSA overtime” worked (Chamberlain, 2003).
Thus, under the FLSA overtime rules, “nothing happens” unless and until a nonexempt employee has actually worked more than 40 hours in a work week. Stated another way, if an employee’s total hours actually worked in a work week are not more than 40, the FLSA overtime rules are not triggered at all (Chamberlain, 2003). No FLSA overtime pay is due. If, and only if, total hours actually worked exceed 40 in a work week, then the FLSA overtime rules may come into play.
FLSA overtime pay for nonexempt employees is computed based on all the time the employee has actually worked in a work week. All time actually worked counts, but only time “actually” worked counts. Therefore, the first step in the FLSA overtime formula is to determine how much time a nonexempt employee has actually worked in a work week (Chamberlain, 2003).
With only a few exceptions, all time an employee is required to be at the premises of the employer is work time. All regular shift time is work time. This includes “breaks” (if there are breaks), and “nonproductive” time (for example, time spent by a receptionist reading a novel while waiting for the phone to ring). In addition, all time spent by an employee performing work-related activities that the employer suffers or permits is work time, whether on premises or not and whether “required” or not. Work done “at home” or at a place other than the normal work site is work, and the time must be counted. “Voluntary” work is work, and the time must be counted (Chamberlain, 2003). “Unauthorized” or “unapproved” work is work and must be counted (provided that the employer knows or should know it is being done and permits the employee to do it). It is the privilege and responsibility of the employer to “control the work” of its employees. If an employer does not wish an employee to perform work, it must prohibit the employee from doing so if it does not wish to include that work time in the required FLSA pay computations (Chamberlain, 2003). An employer may not accept the benefit(s) of work performed by its nonexempt employees without counting the time in computing pay due under the FLSA. Important FLSA regulations on these points are at 29 CFR §§785.11, 785.12, and 785.13.
The FLSA uses the work week as the standard for computing overtime pay due, and each work week stands alone. Thus, a nonexempt employee’s time worked “vests” at the end of each work week (or work period). Work time may not be “averaged” from work week to work week (Chamberlain, 2003). For example, an employee who works 44 hours in week one, followed by 36 hours in week two, is entitled to 4 hours of FLSA overtime pay for week one and may not be paid based on an “average” of 80 hours in the two week period. (Two exceptions to this might be for some medical care employees, and government police officers and fire fighters, who are permitted to be paid on special “alternative work periods.”)
The FLSA does not require that nonexempt employees be paid hourly. Nonexempt employees may be paid by means of a salary. Salaried nonexempt employees are still entitled to FLSA overtime pay if, when and to the extent that they actually work more than 40 hours in a work week (Chamberlain, 2003). FLSA overtime pay is time and one-half of the employee’s regular rate of pay. When a nonexempt employee is paid by a salary, the amount of the salary must be converted to its hourly equivalent to determine the regular rate of pay (time and one-half of which is the employee’s FLSA overtime rate of pay).
The FLSA formula for determining the regular rate is to divide the total amount of straight time compensation received by the employee “for work” by the number of hours that compensation was intended to pay for. For example, if nonexempt employee “A” is paid a salary of $400 per week for a normal 40 hour work week, the hourly equivalent is $10 per hour (Chamberlain, 2003). However, the FLSA does not prescribe how many hours per week of straight time a salary must be intended to compensate. This is left to the market, and the arrangements between employers and employees. Thus, for example, a nonexempt employee (“B”) may be hired at a salary of $400 as straight time compensation for a normal work week of 50 hours. In that situation, the hourly equivalent of this salary is $8 per hour. If the employee (“C”) is hired at a salary of $400 per week for 37.5 normal straight time hours per week, the hourly equivalent is $10.67 per hour (Chamberlain, 2003).