The Warshawsky Law Firm Blog

Friday, January 18, 2013

How Do I Know If I Am Owed Overtime Pay?

One of the most important rights afforded by federal and state employment laws is the right to overtime pay.  In this blog entry, I am going to discuss some of the basic legal rules surrounding this issue.  Please note:  This is a very complex issue and an employee's eligibility for overtime and the amount of overtime owed to the employee will depend on the circumstances of each case.  Any worker or company with questions about overtime pay should consult a qualified employment lawyer.

Generally speaking, overtime pay means the extra pay that an employee is owed for working more than 40 hours in a workweek.  In recent years, there has been an explosion of individual and class action lawsuits filed by workers who were not paid the overtime owed to them.  Unfortunately, many employers either do not know or do not follow the rules governing overtime pay.  This can result in large amounts of back pay and liquidated damages being owed to employees, which hurts both the employee (who should have been paid in a correct and timely manner) and the employer (who will have to pay significant penalties).

When is an employee entitled to overtime pay?

Assuming an employee is eligible for overtime pay (more on that below), the law normally requires the payment of overtime whenever the employee works more than 40 hours in a workweek (defined as seven consecutive 24-hour periods).  Importantly, overtime pay is not owed for working more than 8 hours in a day or for working on weekends or holidays; it only applies when the employee works more than 40 hours in a workweek.  For example, if an employee works three 12-hour shifts per workweek (36 hours total), he is not owed overtime; if he works six 7-hour shifts (42 hours total), he is.

How much overtime pay is required?

Generally speaking, if an eligible employee works more than 40 hours in a workweek, he must be paid time-and-a-half for every hour over 40.  In other words, an employee is owed a "premium" of an additional 50% pay for every overtime hour.  The overtime rate is based on the employee's "regular rate" of pay, usually his regular hourly wage.  The overtime rate is the regular rate times 1.5.  For example, assume an employee is paid $20 per hour; his overtime rate would be $30 per hour.  This is the amount he must be paid for every hour over 40.

Are all employees entitled to overtime?

No.  Many categories of workers are exempted from the overtime requirement, meaning they do not receive any extra pay for working more than 40 hours in a workweek.

The most common categories of exempt workers include:

Executive employees (who manage business operations and supervise at least two other employees);

Professional employees (who perform intellectual work requiring advanced knowledge and specialized training);

Administrative employees (who exercise responsibility and discretion related to the business operations of the company); and

Computer professionals (who perform high-level work involving computer systems and programs). 

A complete listing of exemptions may be found here.

Please note:  Whether or not an employee is exempt can be complicated and depends on the circumstances of each case.  A qualified employment lawyer can provide guidance on this issue.

If an employee is paid a salary, does that mean he is not entitled to overtime?

Not necessarily.

It is a common misconception that, so long as an employee is paid a salary, he is not entitled to overtime. This often is not the case.

It is true that many overtime exemptions include, among their various requirements, that an employee be paid a certain minimum salary.  For example, the executive, professional, and administrative exemptions require a minimum salary of $455 per week.  (However, the minimim salary requirement does not apply to teachers, lawyers, and doctors.)  Being paid a "salary" means that an employee receives a predetermined amount of compensation each pay period, which does not depend on the quantity or quality of the employee's work.  But these exemptions have additional requirements besides the salary requirement -- requirements that pertain to the nature of the employee's work and the amount of responsibility exercised by the employee. 

For example, suppose a receptionist in an office is paid a salary of $1000 per week.  If he works 50 hours per week, is he owed overtime?  Generally speaking, yes, he is owed for 10 hours of overtime, unless he falls under one of the exemptions.  But which exemption?

Companies often claim that ordinary office workers, like receptionists and secretaries and assistants, are "administrative" employees.  However, to qualify for the administrative exemption, an employee's "primary duty" must be the performance of office work "directly related to the management or general business operations" of the company and must involve "the exercise of discretion and independent judgment with respect to matters of significance."  In most cases, ordinary office workers do not perform work that meets these requirements.  Therefore, they are not exempt and are owed overtime.

In the example of the receptionist, he is owed for 10 hours of overtime.  How much is he owed?  His overtime rate is 1.5 times his "regular rate" of pay.  Because he is paid by salary, his "regular rate" is determined by dividing his salary by the total number of hours worked in that workweek, i.e., $1000 divided by 50 hours = $20 per hour.  His overtime rate, therefore, is $30 per hour.  However, this does not mean he is owed an additional $300.  Why not?  Because he already was paid $20 for each hour of overtime.  Rather, he is owed the overtime premium that he did not get paid, i.e., the extra $10 per hour.  In sum, he is owed $100.

Of course, in some cases, companies actually refuse to pay employees for hours worked over 40.  For example, some businesses have a "policy" that hourly employees will be paid only for 40 hours each week, even if they work more than 40 hours.  Some businesses instruct their employees to work "off the clock" once they have reached 40 hours in a workweek.  These types of policies are blatantly illegal.  In those cases, the employees are owed full overtime pay (1.5 times their hourly wage) for every hour over 40.

What if an employer fails or refuses to pay overtime?

Both federal and state laws provide powerful legal remedies for employees who are not paid the overtime they are owed.  These remedies include back pay (compensation for the amount of overtime owed) and liquidated damages (double damages), as well as attorney's fees and costs.  Moreover, overtime laws intentionally favor employees, making it easier for them to prevail in these cases.  The statute of limitations for bringing an overtime claim under federal law is two years (three years for willful violations) and six years under state law.  Although these sound like long periods of time, if an employee believes he or she is owed overtime, it is very important to contact an attorney right away.  Likewise, companies should not wait to correct overtime problems, as the potential damages and penalties quickly add up to very large amounts.

Additional information about federal and state overtime laws can be found here (US DOL website) and here (NY DOL website). 

The Warshawsky Law Firm represents employees and employers in overtime pay cases. 

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