SHOULD YOU BE GETTING OVERTIME PAY?

Unpaid Overtime

Many workers who should be getting overtime are not paid all the wages they are owed under the law. These are unpaid overtime wages, and may be obtained for workers if they have representation. Because federal and state wage and hour laws are complicated and always changing, employees often don’t know that they should be getting overtime or how overtime should be calculated.

A worker is punching his time card with the automatic clock

OVERTIME LAW

Overview

The Law

The Fair Labor Standards Act (“FLSA”) is a federal law that sets rules about minimum wage, overtime pay, record-keeping and child labor standards affecting full-time and part-time workers in both the public and private sector. In addition to the federal law, many states and cities offer enhanced protections, including higher minimum wage, laws pertaining to rest or meal breaks and requirements that employers provide wage information.

What is overtime?

Many workers are required under federal and state law to receive overtime. Overtime pay is one and a half (1.5) times a worker’s regular hourly rate, at least the applicable federal or state minimum wage, which must be paid for all hours worked after 40 hours per week. Overtime must be calculated and paid on a weekly basis, regardless of how often workers are paid. Employers cannot carry hours over from one week to another to avoid paying overtime.

Who gets overtime?

In order to be entitled to overtime, a worker must be a “non-exempt” employee. This means that the worker may not fall into any categories or “exemptions” of jobs that are not protected by overtime laws. Second, “independent contractors” and certain other types of workers, such as freelance workers and some gig workers, are not required to be paid overtime.

More explanation of the exemptions and independent contractors can be found below. The most important thing to know is that your correct classification is based on your actual job duties and responsibilities and the conditions of your employment, not on the way that your employer classifies you or your job title.

What about salaried workers?

Many workers who are paid a salary, a weekly or daily rate or piece rate believe that they are not owed overtime because they are paid a salary. This is not accurate. While the method and amount of pay may be a factor in whether a worker is exempt, an employer cannot avoid paying overtime simply by paying a salary.

Other Common Wage and Hour Issues

Federal and state wage and hour laws offer many other protections in addition to overtime. Find out more information on minimum wage. Tipped employees are subject to special rules, discussed set. Construction workers who work on public/government projects or projects that receive government funding are entitled to a higher wage rate, called “prevailing wages.” Find out more information on prevailing wages.

Common Overtime Violations

Many employers pay workers less overtime than they are owed by evading the requirements of federal and state law in several ways. Employers may tell workers to only clock 40 hours per week and to clock out after that. However, employers must keep accurate time and wage records, and if they do not, workers may rely on their own memories of their hours and pay. Employers often misclassify employees or give inflated job titles to give the appearance that workers perform management duties, even if they primarily serve customers or perform manual labor.

Employers may attempt to take overtime hours from one week and add them to another week to avoid paying overtime, such as where an employee works 45 hours one week and 35 hours the following week. That worker must be paid 5 hours of overtime, and their employer cannot subtract 5 hours from the first week and apply to the second week.

Employers cannot require or ask workers to forego overtime pay. Employees cannot agree not to receive overtime pay. If you have agreed with your employer not to receive overtime pay, you are still entitled to receive overtime pay for all overtime hours worked.

Commonly Misclassified and Underpaid Employees

Pelton Graham has represented workers in a wide range of industries who are owed overtime. In some instances, employers do not bother to pay overtime at all, telling workers “that’s not how we do it” or threatening to take action against employees who request overtime. In others, employers routinely misclassify employees as exempt or independent contractors.

Workers who commonly experience unpaid overtime include:

Restaurant workers (tipped and non-tipped),
Construction workers (private and public jobs),
Grocery store workers (including employees classified as “managers” or “assistant managers”),
Home health aides,
Retail workers (including some “managers” and “assistant managers”),
Exotic dancers,
Help desk employees,
Delivery drivers and couriers,
And many more.

HOW TO DETERMINE YOUR OVERTIME WAGES

Overtime Calculator

In many cases, calculating overtime is straightforward. In others, where workers are paid different rates for different kinds of work, paid piece rates or may be paid according to the “fluctuating work week,” calculations may be more complicated.

STEP ONE

Figure out your regular hourly rate. If you are paid hourly, this is your regular wage rate. If you are paid a flat weekly rate, your regular hourly rate is calculated as your total weekly pay divided by your total hours worked. If you are paid $400 for 40 hours of work, your hourly rate is $10.

Similarly, if you are paid piece rates, your hourly rate is your total pay divided by your hours worked. If you are paid at multiple rates, you must take the weighted average, based on how many hours you worked at each rate.

The applicable hourly rate to be used in calculating overtime must be at least the minimum wage, even if a worker is improperly paid less. All non-exempt employees must be paid at least minimum wage. In many states, tipped employees may be paid at lower rates set by federal and state law. However, both tipped and non-tipped workers must still be paid at minimum wage.

STEP TWO

Calculate your overtime rate. For non-tipped employees, except those who are subject to the fluctuating workweek, the overtime rate is one and one-half (1.5) times your hourly rate. For example, a worker who is paid $10 per hour must be paid $15 per hour for overtime.

Calculating the overtime rate is more complicated for tipped employees in states where employers are permitted to pay lower rates for tipped employees. In those states, employers are allowed to subtract an amount known as the “tip credit” from the regular hourly rate. If the regular non-tipped minimum wage is $10 and the tipped minimum wage is $7, the “tip credit” is $3.

For tipped workers who are paid the tipped minimum wage, the overtime rate is calculated as the regular minimum wage rate times one and one-half, to yield the regular overtime rate, minus the tip credit. In the above example, the regular overtime rate is $15, and the tipped overtime rate is $15 minus $3, for a tipped overtime rate of $12 per hour.

Some employers claim that workers are subjected to the fluctuating workweek rules in order to pay lower overtime rates. However, federal and state law are very specific about the situations in which these rules apply.

STEP THREE

Figure out your overtime hours worked. Any and all time worked over 40 hours per week must be compensated, including partial hours. Some minor rounding of time worked is permitted, as long as the rounding equally works in the employer’s and worker’s favor. An employer can set the workday on which the workweek begins and ends (Saturday, Sunday, etc) but cannot change the day from week to week to avoid paying overtime.

Hours worked include all hours spent on behalf of an employer, typically on or between workplace premises. While most commutes to and from home are not included as hours worked, travel time between job sites is usually considered work. Similarly, tasks that must be done prior to beginning the primary work of the day–such as loading up trucks to take to a construction site or logging into a computer system–may be considered work for which employees must be paid.

You may wish to calculate this on a weekly basis if your hours vary from week to week. If you work more regular hours, you can calculate overtime over longer periods.

One employee works 50.5 hours in week 1, 42 hours in week 2, and 30 hours in week 3. This person’s total overtime is 12.5 hours: 10.5 (50.5-40) + 2 (42-40) + 0. A second employee usually works 47 hours per week over 4 weeks. In that case, this worker has worked 28 overtime hours: (47-40) x 4.

In California, under certain collective bargaining agreements and on prevailing wage/public construction jobs, overtime may be required to be paid for all time worked after 8 hours per day.

STEP FOUR

Figure your overtime owed. This is calculated as your overtime rate ($15 and $12 in the above examples) multiplied by your overtime hours worked (12.5 and 28 in the above paragraph).

Federal and state law also provide for additional damages, called “liquidated damages,” for unpaid wages. Employers who incorrectly pay overtime may also commit other federal and state wage and hour violations, including unpaid minimum wage and failure to provide certain wage information.

Am I entitled to overtime?

There are two categories of workers who are generally not entitled to overtime: “exempt” employees and independent contractors and similar workers, discussed below.

Contrary to popular belief, it is not enough to simply receive a salary to be considered exempt. In addition to receiving a minimum wage rate, employees can only be considered exempt if their duties fall within one of the “exemptions” contained in federal and state law.

In other words, an employee must satisfy both a wage test and a duties test to properly be considered exempt.

If an employee does not satisfy one of these two tests, they cannot be classified as exempt and they are owed overtime for all hours worked. More information is provided below as a guide to give you a sense of what kinds of employees are properly classified as exempt. However, the rules are often changing due to executive orders, change in the law, and court decisions that change how the law is interpreted.

In order to receive the most accurate and up to date information specific to your situation, you should contact experienced employment attorneys who can evaluate the conditions of your employment. The attorneys at Pelton Graham LLC have years of experience pursuing claims on behalf of employees who are owed overtime due to failure to pay overtime and misclassification.

Exemptions

Wage Test

Most exempt employees must be paid a salary of at least $455 per week, with exceptions for computer workers below. The minimum salary rate, often called the “salary threshold,” is subject to change by executive order.

Duties Test

The most common exemptions from minimum wage and overtime protection are executive, administrative, professional, computer and outside sales.

Executive (Management)

Executive employees are typically managers and similar high-ranking executives, but not all employees who have the title of “manager” or “supervisor” are exempt. Federal law has very specific requirements for the types of duties and level of authority an employee must possess to be correctly classified as exempt.

Administrative

Administrative employees are somewhat difficult to define but often fall within administrative or business support departments. They must exercise “discretion and independent judgment” as to “matters of significance.” In other words, they are somewhat high-ranking employees who must make decisions about the manner in which they work.

Professional

Professional employees, also called “learned professionals” are typically highly-educated employees who perform “intellectual duties.” Like other exempt employees, exempt professional employees “exercise discretion and judgment.” This broad exemption includes attorneys, teachers and doctors.

Computer

Computer employees who are exempt must meet both a wage and duties test. In other words, employees must be paid either $684 per week or $27.63 per hour. Exempt computer employees work as computer systems analysts, computer programmers, software engineer or in similar positions. Duties include the use of computer systems analysis techniques and procedures and designing, testing, modifying or otherwise working with computer systems or programs.

Note that workers who manufacture or repair computers are not exempt under this category. Employees who rely on computers to work, but are not performing the duties listed above, are also not exempt under this category.

Outside Sales

Outside sales employees have a primary duty of making sales or obtaining orders or contracts from external clients. To be considered exempt, these employees must “customarily and regularly” work outside the employer’s place of business.

Minimum Payment for Certain Exempt Employees

Although many “exempt” employees do not have minimum wage protections, New York state law provides that employees who fall within the executive and administrative exemptions must nevertheless receive a minimum weekly payment as follows.

New York City:
- Large Employers (11 or more employees, or fast food workers): $975 per week ($1,125 per week on and after December 31, 2018);
- Small Employer (10 or fewer employees): $900 per week ($1,012.50 per week on and after December 31, 2018; $1,125 per week on and after December 31, 2019).

Long Island and Westchester:
- $825 per week ($900 per week on and after December 31, 2018; $975 per week on or after December 31, 2019; $1,050 per week on and after December 31, 2020; $1,125 per week on and after December 31, 2021).

Remainder of New York State:
- $780 per week ($832 per week on and after December 31, 2018; $885 per week on and after December 31, 2019; $937.50 per week on and after December 31 2020).

Independent Contractors

Federal law states that independent contractors are not protected by wage and hour protections. In other words, workers correctly classified as independent contractors may be paid less than minimum wage and do not need to be paid overtime. Because independent contractors may legally be paid less than employees, employers often misclassify their workers as independent contractors even though under the law they should be considered employees.

A worker cannot agree to be classified as an independent contractor. Receiving a 1099 form does not automatically mean a worker is an independent contractor. The tests for classification depend on many aspects of a worker’s duties, not on the classification made by an employer.

There is no single test or rule in place for determining whether a worker is an independent contractor. Courts look at many factors that together make up the “economic reality” of the relationship between the worker and employer. As a general matter, the more control and supervision an employer exercises over a worker and how he or she does their job, the more likely that worker is an employee.

Some of these factors include:

How much the worker’s duties are a central part of the business
Whether the relationship is long-term or temporary
How much the worker invests in work expenses and equipment
The amount of control exercised by the employer
The worker’s opportunities for profit or loss depending on their own initiative
Whether the worker places their services on the open market or works just for one employer
Whether and how much the worker operates an independent business

Many states have more restrictive tests of independent contractors that may vary by industry. There are many industries where workers are commonly misclassified as independent contractors in order for the employer to save money. Just because a practice is widespread does not mean it is legal.

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