For many of us, salaries represent a step on the ladder to America’s middle class: a sum that’s guaranteed, regardless of how many hours we work in any given week. Salaries can mean security, a measure of protection from life’s most unpredictable twists and turns. But there’s one thing many American workers don’t associate with a salary: overtime pay.
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Are Salaried Employees Entitled To Overtime Pay?
Yes, many salaried employees are entitled to overtime pay under the protections of the Fair Labor Standards Act (FLSA). But the amount of money you make is only one part of the overtime equation. The Labor Department puts a greater emphasis on what kind of work you do. So figuring out whether or not you are entitled to overtime is actually more complicated than meeting a salary threshold.
Employees who are not covered by the FLSA’s overtime and minimum wage requirements are considered “exempt.” In a general sense, most exempt employees fall under the law’s “white collar exemptions,” which define workers who aren’t entitled to overtime. Receiving a salary is one of the exemption’s three criteria, but many salaried employees don’t meet the other two, and are thus entitled to overtime pay.
If you are exempt, and not entitled to overtime, you’ll say “yes” to all three of the following questions:
1. Am I A Salaried Employee?
You receive a salary if:
- you’re paid a certain amount of money every pay-period, no matter how many hours you actually work.
Being paid regardless of your hours is key to being a salaried employee.
2. How High Is My Salary?
Getting paid regardless of your hours isn’t enough; exemption also depends on how much you make:
- you’re paid at least $455 every week, or $23,660 per year.
3. What Do I Do At Work?
Our third and final criteria for FLSA exemption concerns the tasks you regularly perform at work. This has little to do with your job title, although many employees who are entitled to overtime get cheated by employers who misclassify their jobs.
Do you perform:
- “executive” or “managerial” work?
Do you routinely manage the work of two or more other workers? Do you have some input in hiring or firing decisions?
- “professional” work?
Are your tasks traditionally “intellectual”? Did you receive an advanced (higher than undergrad usually) degree that certifies you as having advanced knowledge of the field in which you work?
- “administrative” work?
Do you perform office work, essential to the daily operations of your employer’s business, that isn’t manual?
For most of these categories, the FLSA will consider how much “independent judgment” you’re required to use during the course of your employment. According to the Department of Labor, “independent judgment” involves evaluating multiple possible courses of action and being able to decide between them.
So do you have the “authority to make […] independent choice[s], free from immediate direction or supervision”? If so, you may fall into one of the job categories that are exempt from the FLSA’s overtime pay protections.
Note that the decisions you make “independently” don’t have to be final. For the FLSA’s purpose, “making” a choice may be the same as “suggesting” one. You may still be eligible for overtime, even if your boss ultimately rejects the decisions you’ve made.
Is My Salaried Position Eligible For Overtime Pay?
In summary, we’ve covered three basic criteria:
- Are you paid a salary?
- Is your salary at least $23,660 annually?
- Are you an “executive,” “professional” or “administrator”?
If you answered “yes” to all three of those questions, you may not be entitled to overtime pay under the FLSA. If you answered “no” to any one of them, you probably deserve overtime.
How Much Is Overtime For Workers With A Salary?
If you’re entitled to overtime, your overtime wage is the same as an hourly employee: one-and-a-half your “regular rate” for every hour you work over 40 in a workweek.
Here’s how to calculate your “regular rate”:
If you receive a salary, your job contract might specify a certain number of hours that you’re expected to work each week. First, find this number and then use it to divide the amount of money you’re guaranteed for a week’s work.
Let’s say Allen gets paid $418 every week. Per year, that comes out to $21,736 making Allen eligible for overtime pay.
According to his employment contract, Allen is expected to work 38 hours every week. His regular rate is equal to $418 divided by 38 hours, or $11 per hour.
One week, Allen works 45 hours.
For the first 38 hours of work, Allen is paid his regular salary of $418. Another two hours, bringing the total to 40 and the FLSA’s definition of one workweek, will be paid at his regular rate: 2 hours multiplied by $11 equals $22.
Allen’s overtime, 5 hours, is calculated as one-and-one-half his regular rate, or $16.50. $16.50 times 5 equals $82.50.
Then we add everything up: $418 plus $22 plus $82.50, for a grand total of $522.50.
But what if you make a set salary no matter how many hours you work in a week?
“Chinese Overtime” & “Fluctuating Workweeks”: When Hours Change But Salaries Don’t
In a sometimes-legal setup known colloquially as “Chinese overtime,” employees who are guaranteed a certain amount, but work “fluctuating” hours every week, get paid overtime at half their regular rate.
Just like exemption, there are three criteria that have to be met for “Chinese overtime” to be lawful:
- Your hours actually need to change from week to week.
- Your “regular rate” can’t fall below the federal minimum wage, $7.25 per hour, or an applicable state minimum wage.
- You and your employer have to have an “unambiguous” understanding that your salary covers all the hours you work in a week, no matter how many hours that turns out to be.
Whether or not “Chinese overtime” is legal can be difficult to determine, especially in regard to that second criterion. For an example that might help clarify the point, click here.
Will Businesses Comply With The New Rule?
No amount of regulation will stop some employers from resorting to accounting tricks, or downright lies, in order to save a few bucks on the bottom line. Even America’s largest employers run afoul of federal and state labor standards.
In 2002, the specialty coffee chain Starbucks faced thousands of wage and hour violation lawsuits in California. Numerous former employees claimed they had been offered salaries, and then misclassified as “managers.” But more than 50% of their work time was actually spent performing menial tasks, rather than managing other employees, they said.
Starbucks agreed to settle the claims for upwards of $18 million.
Contact A Wage Violation Lawyer
Tim Becker, partner at Johnson // Becker, has joined together with an alliance of experienced attorneys to create WageAdvocates.com.
Tim has fought for the rights of working individuals and families for more than 20 years, litigating notable claims and class actions involving FLSA violations against big-name employers, including Farmers Insurance.
Looking to learn more about your legal options and rights under the Fair Labor Standards Act? Our attorneys provide free consultations to anyone who believes they’re not getting paid as much as they’re entitled to.
Call 877-629-9275 or fill out our contact form to speak with an attorney today.
Thank you! It was such a relief to know that Wage Advocates were working hard to get me compensation for my unpaid overtime."Rating: 5.0 ★★★★★