Employment Law Overview
Overtime regulations are a set of federal and state employment laws that protect employees from being overworked. Generally speaking, overwork occurs when an employee is asked to work more than 40 hours per week. Federal laws provide the framework that employers must adhere to while operating in the U.S., while state-based laws can be seen as stricter than their federal counterparts. State overtime and labor laws detail specific provisions that may or may not be included in federal law.
The most widely accepted definition of overtime is working more than 40 hours per week. Federal laws, such as the Fair Labor Standards Act (FLSA), require that employers pay non-exempt employees 1.5 times their standard pay rate for every hour they work overtime.
The FLSA overtime standard does not apply to exempt employees, whose primary responsibilities include non-manual labor for the business. These exempt employees also include outside sales employees, certain computer professionals, doctors, lawyers, teachers and others.
Most state laws set their own minimum requirements for overtime pay. When a business operates in multiple states, the employer must obey the law that most benefits the employee. For instance, some states do not require that businesses pay overtime . In these instances, overtime pay is not available to the employee, even if the FLSA mandates it.
In some cases, such as certain employment contracts and multi-state businesses, employees may be exempt from overtime pay and employment protections. Clear identification of overtime pay eligibility is often outlined during the hiring process, while other overtime exemptions can be as simple as using overtime pay for employees who work in California but live in another state.
Salaried employees who are exempt from overtime pay must meet specific federal and state criteria. A salary must be at least $684 per week (or $35,568 annually) under federal law. States such as Idaho and Texas have a lower requirement of $455 per week (or $23,660 annually). Other states, such as Alaska, require a higher $970 per week (or $50,440 annually). In addition to these salary requirements, employees must primarily perform exempt duties, such as management, overseeing the work of two or more other employees, or be responsible for the finances or operational policies of the company.
Some companies take advantage of overtime pay loopholes, which can lead to employee lawsuits. With a growing number of business operating online, outspoken employees have begun to file lawsuits against companies abusing overtime pay regulations.
Fair Labor Standards Act (FLSA)
The Fair Labor Standards Act is one federal law which may have some effect here. The FLSA establishes minimum wage and overtime rate requirements for workweeks. Federal overtime pay requirements [29 U.S.C. §§ 207, 213(a)(1)] state, in pertinent part that: "Except as otherwise provided in this section no employer shall employ any of his employees who in any workweek is engaged in commerce or in the production of goods for commerce, or who is employed in an enterprise engaged in commerce or in the production of goods for commerce, for a workweek longer than forty hours unless such employee receives compensation for his employment in excess of the hours above specified at a rate not less than one and one-half times the regular rate at which he is employed." The FLSA minimum wage and overtime provisions do not apply to executive, administrative and professional employees who meet certain criteria. These exceptions include professional employees whose primary duty is the performance of work requiring knowledge of an advanced type in a field of science or learning customarily acquired by a prolonged course of specialized intellectual instruction. Pursuant to Department of Labor regulations, for an employee to be exempt from the FLSA overtime requirement as a bona fide executive, administrative or professional employee, the employee must be paid in excess of $455.00 per week on a salary basis, and regularly and customarily engage in specific duties [such as overseeing the work of two or more other employees] on a regular basis.
State Statutes on Salary & Overtime Protections
To prevent employers from flouting the FLSA and not pay overtime to salaried employees, many states have enacted their own laws to ensure non-exempt salaried employees are protected. For example: California law defines "workweek" for purposes of wage and hour law (including overtime) as "a fixed and regularly recurring period of 168 hours, or seven consecutive 24-hour periods, as the employer may design." California law further provides that a workweek runs Sunday through Saturday. As such, an employee who works in a "workweek" fewer than 40 hours in a week, but still receives the same salary as if he or she had worked 40 hours in a week may be entitled to additional regular-rate overtime premium payments under state law. Specifically, employers may be required to divide the employee’s salary by the total fixed or regular scheduled hours for the week, to determine each hour’s "regular rate," which is calculated as follows: Salary / 40 hours = Regular Rate of Pay; Regular Rate of Pay x 1.5 = Overtime Hourly Rate; and Overtime Hourly Rate x (actual OT hours worked at the 1.5 standard) = additional overtime pay owed and payable. Also under California law, unless covered by a bona fide Commission Plan, ("a written contract entered into by employer and employee that provides that all or a portion of the remuneration to [the employee] is in the form of commissions), salespersons’ wages calculated on a flat percentage of sales made or agreed to or a piecework basis must be paid at not less than twice the minimum wage for all the time worked. California law provides: Any employment contract for the performance of work shall be deemed not to authorize the payment of wages on a piece-rate basis, commission basis, or any other method other than payment of the legal minimum wage for all hours worked, unless the conditions of this section have been met. If not so authorized, then all the provisions of this code relating to the payment of wages shall apply to such employment. Some states (e.g., South Carolina) provide that part time, temporary, or seasonal workers are not exempt from the overtime and minimum wage requirements. In Virginia, overtime must be paid to employees who work in excess of 40 hours in a work week, although it appears there is no state law requiring payment of overtime if an employee works more than 40 hours in a work week but less than 40 in a single day. Pursuant to Massachusetts law, if an exempt employee’s taken, actual work hours in a week are less than his or her normal, contracted workweek hours, and the employee does not work extra hours to make up the difference, the employee must be paid 1/5 of his/her weekly wage for each day of normal scheduled hours not worked. Massachusetts law further provides that salaried employees who work a 6-day workweek are entitled to a day of rest to be compensated at straight time for that day.
Rights and Protections
Salaried employees are generally entitled to similar protections as workers paid on an hourly basis. The key consideration is that, regardless of how they are paid, all workers are entitled to a workplace free from the burden of being overworked to the point that their personal lives are compromised. Like hourly workers, salaried employees have full legal protections from excessive overwork and similar labor rights issues. Employees who feel that they are being forced to work unpaid overtime or past their scheduled hours should be aware of their rights under current employment laws. Workers can report their concerns to state and federal labor agencies, or they can file lawsuits against their employers over excessive workload issues. Further, employers may be encouraged to take advantage of new initiatives regarding work-life balance like the Federal Government Notification and Federal Employee Antidiscrimination Act.
Effects of Overworking Employees
Typically when employers engage in the practice of overworking salaries employees, the dangerous and damaging effects of employee burnout create substantial losses which far exceed any anticipated profit from the cost savings obtained by overwork. For example, tired and exhausted employees are more likely to make mistakes. Mistakes result in costs: loss of time, loss of materials, loss of business, or even negligence that could result in liability under state and federal employment laws and regulations including safety regulations . Moreover, wellness programs have become popular at many companies promoting the fitness and healthy living approach to work and life for employees. Consistent with these efforts, even the business community is recognizing the need for employees to have time for adequate sleep, to allow their bodies time to properly rest and recover, exercise, and nurture their spiritual and social relationships, and to experience the pleasure in life for it is in these hours away from the job that employees recharge and rejuvenate, and refine their abilities and capacities.
Recent Developments in Employment Law
In 2015, the Ninth Circuit Court of Appeals held in Excess v. Rounding that an employer’s unlimited paid time off policy does not eliminate the employer’s obligation to pay its workers for wages they have earned. Under the facts of the case, the unlimited paid time off policy was found to be a "reasonable policy" as long as the employer did not have a "secret" policy that discouraged employees from utilizing their unlimited time off. In addition, the case was given significant publicity because the plaintiff’s attorney was Altman "Sandy" Aiken, who is vigorously litigating similar issues involving the status of exempt employees, defined to mean employees who are not entitled to overtime pay.
This case precedes an important current development relating to the exempt status of employees who earn a minimum salary to qualify for exempt status under the IWC Wage Orders. This issue arises in the well-publicized instance of the California Department of Fair Employment and Housing (DFEH) finding that an employer’s policy requiring a "salaried" exempt employee to work a minimum of 40 hours per week in order to receive his/her salary on a "work all or nothing basis" gives the employee a reasonable expectation of being paid the same salary whether he/she works part time or full time, is unlawful and could be an act of discrimination.
The DFEH’s position contradicts the position of the DLSE in Wage Order 4-2001 Section 3(E) and Section 13, Exemption for Personal Attention Industries, that "Unless expressly authorized by the employer, an employee’s salary may not be prorated, reduced or withheld for absences occasioned by the employer regardless of whether such absences are of a full day, half day or shorter duration. Where the employer requires an absence or reduction in work time due to an employer occasioned delay in the work schedule, the employee shall be paid his or her full salary for such absences and/or reduction in hours or for such scheduled rest periods and/or meal periods that are waived by the employer."
Given the DFEH’s enforcement authority, this position may become settled law. However, noting the employer’s argument that this approach could discourage employees from working long hours, while at the same time, possibly resulting in employees working shorter hours in order to receive the same salary, it will be interesting to observe how the courts will receive this conflict in interpretation between the DLSE and the DFEH.
For employers, the take away here is to review carefully the specific policies or application of those policies to see if it would be susceptible to challenge under the proposed interpretation of the DFEH. If the employer has not already done so, the employer may want to consider consulting with counsel to review its policies to ensure proper application of exemption requirements is being handled properly as new employment laws come into play in California.
Following the Law and Employer Liability
To comply with laws against overworking salaried employees, the most reliable rule of thumb is that when an employer requires salaried employees to work harder or longer, employers must pay them for that time. This is true even if you do not have to pay them minimum wage or overtime hours. Requiring an employee to work longer hours without commensurate compensation is considered a violation of the law. As indicated above, it is exceedingly rare for these laws to be listed clearly as such on the law books, so simply reading the statutes can put you in a very precarious position if and when you happen to be sued.
Generally, the legal ramifications of overworking salaried employees fall under wage and hour laws, deceptive practices laws, and discriminatory employment practices laws. These all feature their own distinct restrictions, burdens and limitations. A few of the key takeaways include:
• An employee investigation will typically be required to focus on the specific practices of the business and how the law might apply to the distinct facts of the case.
• Don’t try to deduct from or steal funds by claiming to be late for a meeting. Don’t make an example of people .
• Keep accurate time clocks and payroll records to track deductions. The most common lawsuit filed by disgruntled former employees is for miscalculated wages.
• Recognize that oaths and affidavits are not sufficient; courts are likely able to see past these forms of "proof" to continue to protect employees from unlawful business expense deductions.
• A pro-worker presumption has been imposed on erring employers. If you think you can convince a judge or jury, you’re probably wrong.
• Be careful about retaliation; even managers are protected from retaliation from wage and hour lawsuits.
It’s also important to note that the legal system often favors the employee in these kinds of cases. For example, in California, plaintiffs are entitled to attorneys’ fees, so it’s very easy for employees wasting the company’s time during a legal battle while making you do your own discovery, hiring lawyers and gathering your evidence. Finally, a general lesson to be taken away from these broad requirements is that although most employees will not likely sue you for overworking them, there is a large population of employees that do feel they are overworked, and that are willing to sue you for that.
