The payment of overtime is required by both federal and state laws. The law requires most employers to pay overtime at the rate of 1.5 times the regular rate for all hours over 40 in the workweek
. Special overtime rules apply to government agencies, hospitals, canneries and manufacturing establishments. Q. My employee worked 42 hours in the five-day period from Thursday through Monday. Is he due two hours of overtime? A.
Not necessarily. The answer depends on the number of hours the employee worked during your workweek
. A "workweek" is a regularly recurring period of seven consecutive 24-hour periods. It may begin on any day and hour the employer chooses as long as it repeats on a regular basis. The employer´s workweek is not necessarily the same as an individual employee´s work schedule. If your workweek runs from Sunday through Saturday, for example, your employee may have worked fewer than 40 hours during that period. Q. My pay periods end on the 15th and 30th of each month. Is it correct to pay overtime when the employee works more than 80 hours in the two-week pay period? A.
No. Your pay periods are irrelevant to the overtime calculation. Pay periods and workweeks frequently differ. Pay periods may be established for any period not exceeding 35 days, but overtime must be calculated based on a recurring, seven-day workweek. If a workweek overlaps two pay periods, pay any overtime due for that workweek at the end of the second pay period (when the total hours worked for the workweek are known). For example, if payday is on the 15th and the workweek ends on the 17th, the amount of overtime will not be known for that workweek until the following payday. In other words, pay the overtime on the 30th -- the regular payday for the period in which the workweek ends. Q. For purposes of calculating overtime, how is the "regular rate" of pay determined? A.
If the employee is paid on an hourly basis, that amount is the regular rate. The regular rate may not be less than the minimum wage. If the employee is paid a salary, based on a 40-hour workweek, the regular rate is determined as follows:
- Multiply the monthly salary by 12 to get the annual salary;
- Divide the annual salary by 52 to get the weekly salary;
- Divide the weekly salary by 40 to get the regular rate.
The result is the rate used to compute overtime. Payroll records must reflect overtime pay of 1.5 times that rate for hours over 40 in a workweek.
Q. Do bonus payments increase overtime obligations?
A. Yes. Federal law requires that all amounts, including nondiscretionary bonuses be included in the regular rate when calculating overtime.
Q. Are any amounts excluded from the regular rate of pay?
A. Yes. Examples are expense reimbursements, premium pay for Saturday, Sunday, or holiday work, discretionary bonuses, and gifts for special occasions.
Q. When is overtime required for salaried employees?
A. All salaried employees must be paid overtime unless they meet the test for exempt status as defined by federal and state laws.
CAUTION: Misclassification of salaried employees as exempt creates liability for unpaid overtime. It is the employer´s burden to prove exempt status of employees. See the WH Publication 1281 from the U.S. Dept. of Labor (503-326-3057) or consult the TA's Employee Classification & Wage and Hour Exemptions Handbook for more information.
Q. How is overtime calculated when employees work at different rates of pay in the same workweek?
A. The average rate of pay is used to compute overtime.
EXAMPLE: If an employee worked 16 hours at $10.00 per hour and 30 hours at $12.00 per hour the total straight time amount earned is $520.00. That amount is divided by total hours-worked (46), and the average hourly rate is $11.30. Since the employer has already paid the straight time rates for all hours worked, only an additional .5 times the average hourly rate is due for the overtime hours (.5 x $11.30 x 6 hours = $33.90).
Q. Are employees owed overtime after a certain number of hours worked in a day?
A. In most cases, no. Even an employee who works 24 hours in one day will be owed no overtime if he works no more than 40 hours in the workweek. Employees of manufacturing establishments must receive overtime after 10 hours in a day. Special overtime rules also apply to government agencies, canneries and some hospital employees. For more information see the Oregon Wage and Hour Laws Handbook.
Q. Is there a maximum number of hours employees can work during a day?
A. For most adult workers, there are no limits on daily work hours. Theoretically, employers may schedule employees to work seven days a week, 24 hours per day, so long as minimum wage and overtime laws are observed. Manufacturing employees are limited to 13 hours of work in a 24-hour period. There are also daily and weekly limitations on the hours minors (employees under 18) can work. For more information, see the Oregon Wage & Hour Laws handbook.
Q. Can I require employees to work overtime?
A. Yes. An employer may dictate an employee´s work schedule and hours. Employers may discipline or even terminate employees who refuse to work scheduled overtime. It is advisable to give employees as much advance notice of overtime requirements as practicable.
Q. I paid my employee for 43 hours of wages during the last workweek. Eight of those hours were paid as sick leave, as the employee was out ill for one day. Am I required to pay the employee for three hours of overtime?
A. No. The required overtime pay is 1.5 times the hourly rate for hours worked in excess of 40 in a workweek. Overtime is calculated based on hours actually worked, and your employee worked only 35 hours during the workweek. Unless a policy, contract or collective bargaining agreement states otherwise, you needn´t count sick leave, vacation time, holidays, or other paid time during which the employee did not actually work.
Q. Can I give my employees "comp time" instead of paying overtime?
A. Only government agencies are permitted to offer compensatory time in lieu of overtime. If you are a private sector employer, you must pay overtime when an employee works over 40 hours in a workweek. (If your employee works 45 hours during one workweek, you could choose to schedule the employee for 35 hours during the following week, but that would not relieve you of the obligation to pay for the five hours of overtime during the first workweek.)
Q. Is it legal to flex an employee´s hours within one workweek to keep the employee under 40 hours?
A. Yes. For instance, an employee who works nine hours per day for four work days may be scheduled for only four hours on the fifth day of the week to avoid overtime.
Q. If my employee works unauthorized overtime, am I obligated to pay for it?
A. Yes. You can discipline an employee who violates your policy by working overtime without the required authorization. However, wage and hour laws require that you compensate the employee for any hours you "suffer or permit" the employee to work.
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