Every small business owner knows that when it comes to payroll issues, misunderstandings about how much an employee is supposed to receive in their paycheck can lead to big headaches. To make matters worse, not everyone is aware of the official rules and regulations that cover overtime pay, nor who is exempt from collecting overtime pay.
The Fair Labor Standards Act (FLSA) establishes minimum wage, overtime pay, record keeping, and child labor standards affecting full-time and part-time workers in the private sector, and in federal, state, and local governments. Covered nonexempt workers are entitled to a minimum wage, and overtime pay is required at a rate of not less than one and one-half times the employee’s regular rate of pay after 40 hours of work in a single work week.
There always seems to be some confusion about what the FLSA requires. The following is a list of items that are NOT required by the FLSA:
- sick leave
These benefits are matters of agreement between an employer and an employee (or the employee’s representative).
The FLSA also does not require breaks or meal periods be given to workers. Some states may have requirements for breaks or meal periods. If you work in a state which does not require breaks or meal periods, these benefits are a matter of agreement between the employer and the employee (or the employee’s representative).
While the FLSA requires covered, nonexempt workers to receive overtime pay after 40 hours of work in a workweek, some exceptions to the 40 hours per week standard apply under special circumstances to police officers and firefighters employed by public agencies, as well as to employees of hospitals and nursing homes.
Some states have also enacted overtime laws. Where an employee is subject to both the state and federal overtime laws, the employee is entitled to overtime according to the higher standard (i.e., the standard that will provide the higher rate of pay).
To be exempt from overtime, the employee must be paid on a weekly basis (at least $250 per week regardless of the number of hours worked) and meet the primary-duty test of one or more of the following exemptions:
- Executive. At least 50 percent of the time is spent managing the enterprise or a department of the enterprise in which he or she is employed. Customarily and regularly directs the work of two or more employees.
- Professional. Performance of work requires advanced knowledge acquired by a prolonged course, or primarily performs original and creative work in a recognized field or artistic endeavor or is a teacher. Consistently exercises discretion and judgment.
- Administrative. Primarily performs office or nonmanual work directly related to management policies or general business operations. Customarily and regularly exercises discretion and independent judgment.
- Outside salesperson. An employee who sells goods or services offsite. No more than 20 percent of their time is spent in nonselling hours.