Top 10 Overtime Questions – Part II
Paying overtime may be expensive, but not paying it properly can create even more liability for your organization. In our previous post, we focused on five overtime questions (numbered one through five), including what the basic overtime requirements are, whether overtime must be paid for weekend work, and how overtime is calculated.
In this post, we address five more common overtime situations, numbered as questions six through ten. You will find out when overtime has to be paid in holiday or vacation weeks, whether compensatory time off can be given instead of overtime, when unauthorized overtime should be paid, and what the penalties are for noncompliance.
6. Are employees entitled to overtime in weeks they receive holiday pay or take vacation?
Not unless the employee actually works more than 40 hours in the workweek. Overtime is calculated based on the number of hours an employee has worked, not the number of hours the employee is paid in a week. Thus, in calculating actual working hours for a nonexempt employee, you do not have to count any paid time off in the overtime calculation if the employee did not perform any work during that period, such as paid holidays, vacation, or sick leave.
7. Can we give nonexempt employees compensatory time off instead of paying them cash for overtime?
Private employers generally may not offer or require the use of compensatory time-off in place of overtime pay. However, special provisions (found in 29 U.S.C. §207(o) and 29 C.F.R. §553.23-27) allow certain public employers (such as state and local governments) to grant compensatory time off at the rate of not less than one and one-half hours for each hour of overtime in lieu of overtime cash compensation. This practice is permitted only when the government employer and employee agree on it before the work is performed, either through individual or collective bargaining agreements.
Note, that in certain cases in the private sector where the pay period is more than a week, it may be possible to provide the equivalent of compensatory time off, instead of overtime, as long as the extra hours worked are offset within the same pay period that they are earned. So, for example, in a two-week, 80-hour pay period, if a nonexempt employee works 45 hours in the first week, he should work only 32.5 hours in the second week, taking 7.5 hours as paid time off. The 7.5 hours would represent the five hours of overtime worked in the first week times 1.5. Thus, as a practical matter, the employee receives overtime for the extra five hours worked in the first week because he is still being paid for 80 hours although he has worked only 77.5 in the two-week period. However, the nonexempt employee should not be allowed to accrue the paid time off for use in another pay period since this practice could violate the FLSA.
8. Are exempt employees ever entitled to overtime? Can we pay them overtime?
By definition, exempt employees (such as executive, administrative, and professional employees) are exempt from the overtime and minimum wage requirements of the FLSA and so are not entitled to overtime pay. They generally receive the same salary regardless of the number of hours they work or the quantity or quality of their work.
However, the FLSA exemption regulations, found at 29 C.F.R. §541.604(a), allow you to provide extra compensation to exempt employees without affecting their exempt status. This additional compensation can be paid on any basis, including a flat sum, bonus payment, straight-time hourly amount, time and one-half, or any other basis, including paid time off. So, for example, if an exempt employee worked extra hours to complete a special project, you could pay her overtime without affecting her exempt status.
9. Do we have to pay overtime that we do not authorize?
If you are aware that a nonexempt employee is working more time than is authorized, you must compensate the employee, even if you did not specifically request the additional work. For example, an employee may
voluntarily continue to work at the end of the shift to finish an assigned
task. If you know or have reason to believe that the employee is continuing to work, the time is considered working time that must be paid. It is management’s duty to stop employees, through discipline or other non-monetary means, from working additional time if you do not want to pay for the work time. Note, too, that just having a rule against extra work is not enough; you also must make sure the work is not performed.
10. What are the penalties for not paying overtime?
Your organization can be liable for back overtime pay for up to two years for any employee who has not been properly paid. This back pay liability typically is extended to three years if you are found to have willfully (intentionally) violated the law. In addition, you could be hit with civil penalties of $1,100 per willful or repeated overtime violation. And, to make matters worse, human resources professionals, business owners, and even managers can be held personally liable for violations.
And finally, if you have a broad practice of not paying overtime to employees, you may find your organization subject to a class action claim involving multiple employees, which can result in even bigger payouts. As an example, Wal-Mart recently agreed to settle nearly 65 federal and state class action lawsuits involving allegations of unpaid overtime and break time requirements for a reported $640 million.
Distributed by Sunburst Software Solutions, Inc. with permission from:
HR Matters E-Tips, copyright Personnel Policy Service, Inc., Louisville, KY, all rights reserved, the HR Policy and Employment Law Compliance Experts for over 30 years, 1-800-437-3735. Personnel Policy Service markets group legal service benefits and publishes HR information products, including the free weekly electronic newsletter, HR Matters E-Tips (www.ppspublishers.com/hrmetips.htm). This article is not intended as legal advice. Readers are encouraged to seek appropriate legal or other professional advice.
Crew/Overtime Entry Solution for QuickBooks was developed because overtime rules can be complex and manual calculations are time-consuming and error prone. Find out more about Crew/Overtime Entry Solution by clicking here.
One Response to Top 10 Overtime Questions – Part II
Leave a Reply
- The Great Debate – QuickBooks Desktop vs. QuickBooks Online
- Using Account Numbers in Your QuickBooks Chart of Accounts
- QuickBooks Creating a More Meaningful Payroll Expenses Section
- Calculating & Displaying Fringe Benefits on a Certified Payroll Report
- QuickBooks Payroll Tip - Tracking Employee Advances or Loans
- How To Turn On and Use Manual Payroll in QuickBooks
- Create a QuickBooks Job Cost Report With Hours & Payroll Costs
- QuickBooks Tip - Job Costing Starts With A Simple Item
- QuickBooks Tip - Child Support Garnishments
- QuickBooks for Contractors Tip – Basics of Progress Invoicing
- Welcome to the QuickBooks for contractors blog
- QuickBooks Tip-Handling Employee Reimbursements for Expenses
- QuickBooks Tip-Creating a Functional Payroll Liabilities Section
- QuickBooks Tip: Important Facts About Items Left as Billable
- QuickBooks Tip - Determing Cost of Goods Sold
- Straight from the IRS - Social Security Tax Reduced to 4.2%
- QuickBooks 2013 Upgrade Do's, Don'ts & Frequent Questions
- QuickBooks 2012 - Frequently Asked Questions About Upgrading
- QuickBooks 2015- The Good, Bad and Ugly, Part 1
- QuickBooks 2015 Announced - Important System Requirements