Yes. If your employees are entitled to overtime payments, you have to pay up, whether the overtime was authorized or not.
The rules on overtime were established by the Fair Labor Standards Act (FLSA), which created the 40–hour workweek when it came into law in 1938.
The FLSA requires employers of a certain size or type (more on this below) to pay overtime of 1.5 times the normal rate to all eligible employees (more on this below too) who work more than 40 hours in any workweek.
Q. How is a workweek defined?
A. A workweek is defined as 40 hours in seven consecutive 24–hour periods (totalling 168 hours). It doesn't have to run from Monday to Sunday.
Q. When does the FLSA's overtime rule apply?
A. You have to pay overtime to eligible employees whenever they have legitimately worked more than 40 hours in a single workweek (even if that workweek cuts across two pay periods), regardless of whether or not they have requested to do the overtime in advance.
This applies even if you have a company policy that says all overtime has to be agreed upon with a manager in advance. Ultimately, if the overtime has already been worked—whether the employee has followed your company's overtime policy or not—it has to be paid. If you don't want to end up with a spiralling wage bill, it is your company's responsibility to prevent the overtime from being worked, because once the hours have been clocked, it is too late to withhold the payment.
The relevant section of the FLSA (paragraph 785.11) says, “work not requested but suffered or permitted is work time.” In other words, work is work whether it's authorized or not.
Q. How do you define what “work” is?
A. The FLSA doesn’t actually define what work is, but it does explain that “there need be no exertion” involved and that employers may even “hire a man to do nothing, or to do nothing but wait for something to happen.” Not much of a job, but there you go!
To help clarify what overtime is, the FLSA does list some tasks which do not qualify as work (more on this below).
Q. How do you define what “overtime” is?
A. As soon as an employee works more than 40 hours in a workweek, according to the FLSA they are working overtime. If the employee is eligible for overtime payments, they should now be paid at 1.5 times the normal rate (unless your state, such as California, requires you to pay a higher rate—more on this below).
There are, however, some tasks which cannot be counted as “work” for overtime purposes, so they should not, under the FLSA's rules, be carried out while an employee is still clocked into their time card. These exceptions were first set out in the The Portal-to-Portal Act of 1947 and the main one is commuting. As you'd expect, you can't count driving to and from work as overtime. Other exceptions include any time that is spent changing into or out of work clothes, or washing before or after work; unless these tasks are essential to your job.
Q. Which employers have to comply with FLSA overtime rules?
A. Any employer that does more than $500,000 of business a year and has more than two employees must comply with the FLSA's rules on overtime and overtime payments.
Other employers (likewise with more than two employees) that have to comply with the FLSA are hospitals, businesses providing medical or nursing care for residents, schools, preschools, and government agencies.
Some employees are also covered by the FLSA even if their employer is not. This includes employees whose work is either directly or indirectly involved with products that are sold between states, or if the employee is a domestic service worker such as a housekeeper, full–time babysitter, or cook.
Read more about which employers must comply with overtime rules on the Department of Labor website.
Q. What if my state has its own overtime laws?
A. If your state has its own overtime laws, and your employees are eligible for overtime payments, their pay should be calculated using whichever law (the state's or the FLSA's) provides the higher rate rate of pay.
Q. Am I required to pay overtime for weekend work?
A. The FLSA doesn't make any distinction between weekdays and weekends for the purposes of calculating overtime.
This means you are not required to pay overtime to eligible employees for work that is done over the weekend, or outside of normal working hours during the week, if the employee has not already worked more than 40 hours in that workweek.
Q. When is double time due?
A. Unless your state has its own laws on double time, such as California Overtime Law, you are not required to pay double time. The FLSA says it is the employer's choice whether to pay double time or not, so the only requirement (unless, like California, your state has another overtime law which overrides this) is to pay eligible employees 1.5 times the normal rate for any hours they work above a standard 40–hour workweek.
Q. How do I know which employees are eligible for overtime pay?
A. Exemptions from overtime payments are carefully defined by the Department of Labor, and it is the employer's responsibility to know who is exempt and who is not, so it is a good idea to check the regulations before deciding who should, or should not, receive overtime payments.
The main types of employees who do not qualify for overtime payments are:
- Salaried professional employees
- Some drivers, driver's helpers, loaders and mechanics
- Some commissioned sales employees
- Some seasonal employees
- Some recreational employees
You can find the full list of exemptions here.
Q. What is the difference between uncompensated overtime and unpaid overtime?
A. Employees who are exempt under the FLSA (and therefore not eligible to receive overtime pay) are considered to be working “uncompensated overtime” if they work more than 40 hours in a workweek. By comparison, non–exempt employees who work more than 40 hours in a workweek, and do not get paid for it, have now worked “unpaid overtime” because the money is legally owed to them.
This is also relevant to DCAA compliance.
Q. Can I prevent unauthorized overtime?
A. If you are concerned about the size of your wage bill, you can take steps to limit the amount of unauthorized overtime your employees work. When putting these measures into place, remember that it is the company's responsibility to try to prevent unauthorized overtime, not the employee's responsibility.
This is covered by paragraph 785.13 in the FLSA which says:
In all such cases it is the duty of the management to exercise its control and see that the work is not performed if it does not want it to be performed. It cannot sit back and accept the benefits without compensating for them. The mere promulgation of a rule against such work is not enough. Management has the power to enforce the rule and must make every effort to do so.
Although you must pay overtime—if the employee is eligible for it—whether it has been authorized or not, you can enforce a “no unauthorized overtime” rule to try to limit the amount of overtime your employees work. How you go about enforcing this rule is up to you.
Safeguards that many companies have found helpful include informing employees about the correct procedures, tracking employees' time on a daily basis, being aware of how many hours employees are working each day, setting up overtime alerts that notify employees and managers when thresholds are approaching, and asking employees to seek prior approval from their manager before working overtime. Then, if an employee who has received the proper training breaks the rules, you could give them a verbal warning at first, then a written warning for the next offense, and further action if the employee continues to ignore it. But in all cases, if the employee has already worked the overtime, even if it is against company policy, the FLSA requires you to pay them for it.