Question 1

What is the federal overtime rate under FLSA?

Accepted Answer

The Fair Labor Standards Act (FLSA) requires employers to pay non-exempt employees at least 1.5 times their regular hourly rate for all hours worked over 40 in a workweek. This is commonly called 'time-and-a-half.' The FLSA applies to employees of enterprises engaged in interstate commerce with annual gross sales of at least $500,000 and to employees of hospitals, schools, and government agencies. The U.S. Department of Labor enforces these regulations.

Question 2

What is the difference between exempt and non-exempt employees?

Accepted Answer

Exempt employees are not entitled to overtime pay under FLSA, while non-exempt employees must receive overtime. To qualify as exempt, employees generally must: (1) be paid on a salary basis at least $844/week (as of July 2024, increasing to $1,128/week in January 2025), (2) perform executive, administrative, professional, computer, or outside sales duties. The DOL's duties tests determine exemption status, not job titles. Misclassification can result in significant back pay liability.

Question 3

Which states require daily overtime?

Accepted Answer

California, Alaska, Nevada, and Colorado have daily overtime requirements. California is the most comprehensive: employees earn 1.5x pay for hours 9-12 worked in a day, and 2x pay for hours beyond 12. Alaska and Nevada require 1.5x after 8 hours daily. Colorado requires overtime after 12 hours in a day. Most other states follow the federal weekly-only standard. Always check your state's labor department for current requirements.

Question 4

How does California overtime work?

Accepted Answer

California has the most complex overtime rules. Employees earn: 1.5x their regular rate for hours 9-12 in a day, 2x for hours beyond 12 in a day, 1.5x for hours beyond 40 in a week, and 1.5x for the first 8 hours on the 7th consecutive day worked, then 2x for hours beyond 8 on that 7th day. The California Labor Code requires the more generous calculation to apply when both daily and weekly overtime would apply.

Question 5

What is the FLSA minimum salary for exempt employees?

Accepted Answer

As of July 1, 2024, the FLSA minimum salary threshold for exempt employees is $844 per week ($43,888 annually). This increases to $1,128 per week ($58,656 annually) on January 1, 2025. Employees paid below this threshold generally must be classified as non-exempt and receive overtime pay regardless of their job duties. Some states like California and New York have higher thresholds.

Question 6

Can employers offer comp time instead of overtime pay?

Accepted Answer

For private sector employers, the FLSA generally does not permit 'comp time' (compensatory time off) in lieu of overtime pay. Employees must be paid overtime wages for hours worked over 40 in a workweek. However, public sector employers (government agencies) may offer comp time at 1.5 hours for each overtime hour worked, up to certain limits. Some states have additional restrictions on comp time arrangements.

Question 7

How do I calculate overtime for employees with multiple pay rates?

Accepted Answer

When an employee works at different pay rates during a week, the regular rate is calculated using the weighted average method: total straight-time earnings divided by total hours worked. Overtime is then paid at 1.5x this weighted average rate. For example, if an employee works 20 hours at $15/hr and 25 hours at $18/hr, their weighted average is ($300 + $450) / 45 = $16.67/hr, and overtime is $25/hr.

Question 8

What records must employers keep for overtime compliance?

Accepted Answer

The FLSA requires employers to maintain records for at least 3 years, including: employee name and identifying information, day and time workweek begins, hours worked each day and total hours per week, total daily or weekly straight-time earnings, regular hourly rate, total overtime compensation per week, additions to or deductions from wages, total wages paid each pay period, and dates of payment. Accurate timekeeping is essential for compliance.

Question 9

Is overtime pay taxed at a higher rate?

Accepted Answer

Overtime pay is not taxed at a separate, higher tax rate — it is added to your regular wages and the combined total is subject to ordinary income tax withholding. However, because overtime inflates your gross pay for that pay period, your employer may withhold more federal income tax than usual since payroll withholding is calculated as if you earned that higher amount every period. At year-end your actual tax liability is settled on your return, so any over-withholding comes back as a refund. In short, you keep every dollar of overtime; the perception of 'losing it all to taxes' stems from higher single-period withholding, not a higher tax rate on the overtime itself.

Question 10

Can my employer average my hours across two weeks to avoid paying overtime?

Accepted Answer

No. Under the FLSA, overtime is calculated on a fixed, recurring seven-day workweek basis. An employer cannot average 35 hours one week with 45 hours the next to claim you only averaged 40 hours and owe no overtime. The five hours over 40 in week two must be paid at the overtime rate regardless of the prior week's total. Employers may set any consistent seven-day period as the workweek, but once established it must be applied uniformly and cannot be changed to avoid overtime obligations.

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