176,193 reasons to be careful when trying to limit employee overtime

Last week, I read this press release from the U.S. Department of Labor’s Wage and Hour Division announcing a six-figure recovery from an employer that “illegally placed a cap on overtime at 16 hours per pay period and paid any overtime beyond 16 hours at straight time rates, a violation of the Fair Labor Standards Act.”

So, let’s discuss some FLSA/overtime rules.

Unless exempt, employees whom the FLSA covers must receive overtime pay for hours worked over 40 in a workweek at a rate not less than time and one-half their regular pay rates.

What is a workweek? It’s 168 hours — seven consecutive 24-hour periods — that the employer fixes and which occurs regularly. It may be a calendar week. Or it could begin on any day and at any hour of the day. Heck, an employer can establish different workweeks for different employees or groups of employees.

When a non-exempt employee works more than 40 hours in the workweek, the employer must pay that employee overtime. Does an employee work more than eight hours in a day? Sundays? Holidays? It’s no big deal unless the total number of hours worked in the workweek exceeds forty. (Your mileage may vary under state law and in unionized workplaces.)

Indeed, the FLSA does not limit the number of hours employees aged 16 and older may work in any workweek. However, an employer can establish overtime rules. For example, an employer can require employees to receive written permission from a supervisor before working overtime. Similarly, an employer can cap the overtime employees may work without permission to work more. And if employees violate those work rules, the employer can discipline them. But if the employer knows that non-exempt employees are working overtime hours — even in violation of the work rules — it must pay them overtime at time and a half.

So, you can see why the employer in the press release found itself in hot water with the Department of Labor. Yes, it could try to cap overtime at 16 hours per workweek. But it couldn’t change the overtime calculation of those who exceed 16 hours of OT per workweek. Instead, the employer had to pay them that overtime at time and a half too.

The Department of Labor does not take kindly to FLSA scofflaws. States don’t like employers violating their (sometimes nuanced) wage and hour laws, either. So, talk to an employment lawyer before making up employee pay rules. Yes, it may cost you a few bucks — don’t take wage-and-hour advice from a LI post. But that small investment could help your business avoid significant pay practice liability later.