As an employer, you must comply with federal and state labor regulations or run the risk of lawsuits and enforcement actions. Overtime pay and claims about unpaid overtime wages are leading sources of disputes between workers and the companies that employ them. Such claims can damage your reputation and your bottom line.
Businesses often want to minimize their overtime expenses, while workers are often eager to secure overtime pay when possible, which is why conflicts are so common. Workers who think they should have received overtime pay for the work they performed will often not hesitate to take a company to court.
There are numerous rules that govern when overtime pay requirements exist, and there are also possibly obligations your company may have created for itself in its employment contracts. When looking at federal regulations, what are the two main reasons that a company can exempt a specific worker from overtime pay requirements even if they put in more than 40 hours of labor in a specific pay period?
The worker receives a salary
Having a predictable income no matter how long you work is valuable to many employees. Salary arrangements also benefit employers who can more easily control their staffing costs.
Many workers paid on a salary basis are exempt from overtime pay requirements. Provided that the salary meets the current federal threshold for exemption, which is $35,568, a worker paid on a salary basis could put in 50 or even 60 hours and not receive any extra compensation, let alone time-and-a-half pay for those extra hours.
The potential for abuse in such scenarios is one reason why there is a minimum salary requirement adjusted occasionally to reflect cost of living increases and the average wage in the country.
The worker is a contractor, not an employee
Companies don’t always offer indefinite employment arrangements when they hire someone. Sometimes, they only need that worker to fulfill specific duties or help complete a specific project. Independent contractors are self-employed and are there for not due overtime wages regardless of how many hours they perform working on a project.
Understanding the rules regarding overtime pay can help your company better respond to pending wage claims from its current or former staff members.