12 Myths about Overtime Exemptions

 

Some employers have certain misconceptions about overtime and exemptions. Below are some of the most common myths along with an overview of the FLSA’s requirements:

 

 

Myth: “Unauthorized” overtime need not be paid.

Fact: If a non-exempt employee has worked overtime, he or she must be paid an overtime premium, regardless of whether the overtime was pre-authorized. The fact that an employer has a policy that no overtime work is permitted unless authorized in advance doesn’t relieve the employer of this requirement. The employer, however, may subject the employee to disciplinary measures for working unauthorized overtime, but in no case may the employer withhold overtime pay.

 

Myth: An employer may offer employees “comp time” in lieu of overtime pay. 

Fact: Compensatory time off (“comp time”) is paid time off that is offered to public sector employees instead of cash payment for working overtime hours. Comp time is not permissible in the private sector, so private employers may not offer compensatory time off in lieu of overtime pay. 

 

Myth: An employee’s hours may be averaged over two workweeks when determining whether overtime is due.

Fact: The FLSA requires a single workweek to be used when determining if an employee is due overtime, irrespective of the employer’s pay cycle. For instance, if you have a bi-weekly pay schedule and an hourly employee works only 30 hours in one week, but 50 in the second week (a total of 80 hours over the two workweeks), that employees’ hours cannot be combined and “averaged” to avoid overtime payment. In this case, the employee would be entitled to 10 hours of overtime pay (all hours worked over 40 in that second workweek).

 

Myth: An employer may exclude rest periods when determining whether the employee has worked more than 40 hours in a workweek.

Fact: Rest breaks are considered hours worked and therefore must be paid and included when determining overtime. The Department of Labor (DOL) defines a rest break as any period lasting 20 minutes or less that the employee is allowed to spend away from work. Bona fide meal periods, on the other hand, aren’t considered hours worked and need not be included when determining whether an employee is due overtime as long as the meal period is at least 30 minutes and the employee is fully relieved of all duties for the purpose of eating a regular meal.

 

Myth: An employer may exclude time spent travelling when determining whether the employee has worked more than 40 hours in a workweek.

Fact: Under the FLSA, travel that keeps an employee away from home overnight is considered hours worked when it takes place during the employee’s regularly scheduled work hours, regardless of which day of the week the travel occurs. In addition, travel time for special one day assignments, certain emergency calls, and travel from job site to job site throughout the work day is compensable. This means that the time must be included when determining whether overtime is due.

 

Example: A non-exempt employee’s regular work hours are 8 a.m. to 5 p.m., Monday through Friday. The employee goes on a business trip that begins with a 9 a.m. flight on a Saturday. The flight takes 3 hours. Even though the travel does not occur on the employee’s normally scheduled work day, the entire flight must be considered work time since it cuts across the employee’s normal work hours. This time, therefore, must be taken into account when determining whether overtime is due.

 

Myth: If an employer pays an employee a salary, the employee is automatically exempt from overtime.

Fact: There is often confusion about the differences between a salaried and an exempt employee because the terms are sometimes used interchangeably. Employers have the option of paying non-exempt employees on a salary basis. However, simply because an employee is paid on a salary basis does not mean the employee is exempt from overtime; the employee must meet very specific criteria in order to be considered exempt. These exemptions are narrowly defined and are based on an established set of criteria relating to the employee’s salary and duties. Therefore, salaried non-exempt employees are entitled to overtime when they work more than 40 hours in a workweek.

 

Myth: An employer can determine whether employees are exempt or non-exempt based on their job titles.

Fact: An employee’s job title does NOT dictate whether he or she is exempt. As mentioned above, each exemption has its own tests regarding the employee’s salary and primary duty. If the employee’s salary or primary duty fails to meet an exemption’s tests, the employee must be classified as non-exempt no matter what his or job title is.

 

Myth: If an employee has a college degree or if an employer requires an employee to have a college degree, the employee is exempt from overtime.

Fact: The fact that an employee has a college degree or the employer requires a college degree does not mean the employee will qualify for an exemption. Once again, the employee must meet the narrow salary and duties criteria to be considered exempt.

 

Myth: My employees are technically non-exempt but they have asked me to classify them as exempt. Since they are willing to waive their right to overtime, it is OK for me to classify them as exempt.

Fact: Employees may not waive their right to overtime. If they don’t satisfy the tests for exemption, they must be classified as non-exempt and paid overtime whenever they work more than 40 hours in a workweek.

 

Myth: All supervisors will qualify for exemption if they supervise at least two full-time employees.

Fact: This myth is often the result of a misunderstanding of the executive exemption’s duties test. To be an exempt executive employee, the employee must be paid on a salary basis at a rate no less than $455 per week and satisfy all of the following components of the duties test:

 

• The employee’s primary duty must be managing the enterprise, or managing a recognized department or subdivision;
• The employee must customarily and regularly direct the work of at least two or more other full-time employees or their equivalent; and
• The employee must have the authority to hire or fire other employees, or provide suggestions and recommendations that will be given particular weight in the hiring, firing, advancement, promotion or any other change of status of other employees.

 

All three of the above requirements must be satisfied in order to qualify for the executive exemption. Note: A supervisor may qualify under another exemption provided the applicable duties test is satisfied.

 

Myth: If an employee is classified as exempt under the FLSA, the employee is also exempt under state law.

Fact: State laws may have additional requirements for exemption. If an employee is non-exempt under either federal or state law, the employee must be classified as non-exempt and receive overtime pay in accordance with that law. It should be noted that some states have additional overtime requirements. For example, California requires overtime when a non-exempt employee works more than 8 hours in a workday.

 

Myth: If an employer requires exempt employees to track their hours, the employees will lose their exempt status.

Fact: Employers are permitted to track exempt employees’ hours. However, employers are prohibited from making deductions from an exempt employee’s pre-determined salary on the basis of hours worked. In other words, employers may track exempt employees’ hours as long as the employees still receive their full salary no matter how few hours they work.