When to Pay Overtime: Weekly vs. Daily Standard

Federal law and the laws of most states impose a weekly overtime standard, which means that non-exempt employees are entitled to overtime for every hour more than 40 that they work in a week, regardless of how many hours they work in a day. For example, Alex is a non-exempt employee who works 12 hours on Monday and 6 hours on Tuesday (and doesn't work any more hours in the week). He is not entitled to receive overtime under the weekly overtime standard, even though he worked more than eight hours on Monday.

Employers Who Must Pay Overtime

Although the vast majority of employers in this country must pay overtime, not all of them have to. To figure out whether you must pay overtime, first determine whether you are covered by the federal Fair Labor Standards Act (FLSA), the federal wage and hour law that sets out the overtime rules. Generally, your business is covered by the FLSA if you have $500,000 or more in annual sales. Even if your business is smaller, however, you must pay overtime if your employees work in what Congress calls "interstate commerce" -- commerce between states. This includes more than you might think, including making phone calls to or from another state, sending mail out of state, or handling goods that have come from, or will go to, another state.

Which Employees Are Entitled to Overtime

If your business is covered by either the FLSA or your state's overtime law, then all of your employees are entitled to overtime unless they fit into an exception. The following workers are "exempt" from the federal overtime law -- meaning that they fit into an exception and are therefore not entitled to overtime:

• executive, administrative, and professional employees who are paid on a salary basis (see below)
• independent contractors
• volunteer workers
• outside salespeople (that is, employees who customarily and regularly work away from the employer's business, selling or taking orders to sell goods and services)
• certain computer specialists (such as systems analysts, programmers, and software engineers) who earn at least $27.63 per hour
• employees of seasonal amusement or recreational businesses, such as ski resorts or county fairs
• employees of organized camps or religious or nonprofit educational conference centers that operate for fewer than seven months a year
• employees of certain small newspapers
• newspaper deliverers
• workers engaged in fishing operations
• seamen
• employees who work on small farms
• certain switchboard operators
• criminal investigators, and
• casual domestic baby sitters and people who provide companionship to those who are unable to care for themselves (this exception does not apply to those who provide nursing care or to personal and home care aides who perform a variety of domestic services).

Administrative, Executive, and Professional Employees

Probably the most common -- and confusing -- exceptions to the overtime laws are for so-called "white collar" workers. Employees who the law defines as "administrative, executive, or professional" need not be paid overtime.

Salary Basis

An employee who is paid on a salary basis must earn at least $455 per week, and must receive the same salary every week, regardless of how many hours the employee works or the quantity or quality of the work the employee does. There are a few circumstances in which an employer may pay a salaried worker less than his or her full salary for a week -- for example, if the employee takes a couple of days of paid sick or vacation leave, or takes time off under the Family and Medical Leave Act. Generally, however, if an employer docks an employee's pay (for taking a personal day or not meeting a sales target, for example), then the employee is not paid on a salary basis and is entitled to overtime.