An Ultimate Guide to Small Business Overtime Laws

US laws regulating overtime requirements can change and the penalties for noncompliance can be costly. Therefore, it is essential to stay in the know.

Every employer should know the employees whom are exempt from overtime protections and which are not. Do you know the various categories of employees under exemption? This is an important question and the answer seemed like it was about to change in the last few years. Recently, the U.S. Department of Labor (DOL) has indicated that it will begin new discussions around overtime rules. That makes it a highly likelihood that the rules could change once again.

Presently, the Fair Labor Standards Act (FLSA) governs the overtime laws while the DOL is responsible for administering them. Below is a look at the current lay of the land and what compliance looks like. Moreover, we have highlighted the risks you are taking if you fail to abide by the rules.

Overtime rules today

The current rules governing overtime sets out the conditions that determine when overtime is paid and rate at which workers earn overtime pay. These rules also indicate the classifications of employee are exempt from overtime protections under the law.

Current rules on overtime pay states that employees must receive overtime pay for any hours worked beyond 40 in one workweek. However, this may not be the case if the employee falls into an exempt category. Overtime pay must not be less than time and one-half their regular rate of pay. It is imperative to note that there is no limit of overtime hours an employee should work to be compensated properly.

The current law defines a workweek as any fixed and regularly recurring period of 168 hours. That equates to seven consecutive 24-hour days. Time worked by a nonexempt worker in that period must be paid at the normal rate of time and one-half pay.

Penalties for noncompliance

The basic risk that may face employers for failure to comply with overtime law comes from employee lawsuits. Overtime lawsuits can be expensive and detrimental to the reputation of a business. In case of FLSA violations, employers will be required to provide back pay to the impacted employees. In addition, the employer pays a penalty called liquidated damages, which is equal to the amount of back pay owed. The fines and penalties payable could go up fast at any unprecedented time. Consequently, this may make the cost of noncompliance doubly expensive.

The problem comes when an employer commits a violation for a long time, or for multiple employees. When one makes a mistake repeatedly, the cost to correct that mistake becomes quite large. It is a requirement by law to pay the employee, interest, and penalties. Enforcement of the overtime rules does not just come in the form of lawsuits. The DOL may also uncover violations through its Wage and Hour Division. Deliberate violations of FLSA could bear fines up to $10,000 and even the possibility of imprisonment for repeated intentional violations.

The potential rule change

A few years ago, it looked as if the Obama administration’s DOL was going to revise the rules governing exemption. This was aimed at expanding the number of employees in the US who would qualify for overtime protections under the law. The rule was proposed to change and add close to 4.2 million workers to the list of employees eligible for overtime pay. That would be by loosening exemptions and increasing the pay threshold for eligibility from $455 per week to $913 per week. Therefore, workers making a salary of $47,476 would now qualify for overtime protection under the law.

At that time, many businesses in the US began scrambling to adjust their policies accordingly. Often, this involved changing salaried employees to an hourly wage or reassigning their duties. In the end, these changes did not matter. Under Trump’s administration, the DOL scrapped those rules, leaving the existing regulations in place.

On may 9 2018, Trump administration’s DOL revived conversation around the overtime rules after signaling there would be a review of the regulations. Even though the there are no new proposed rules, the agency said we should expect those later this year. Nevertheless, it appears that the new discussion will focus on different aspects of the overtime rules.

Do not forget state law

It is imperative to note that overtime rules listed above are the federal minimums. That implies that they are an absolute floor. The States can and do implement more stringent overtime protection laws. Therefore, one may be required to pay more overtime depending on the state your business is located. For instance, one state may require overtime for more than eight hours in a day instead 40 hours per week. Always recall that failure to do so could result in penalties assessed by the state government.

If you may require more information concerning overtime laws in the US, you can get in touch with us.