When a person starts a new job, they are usually told what their work hours will be. For many, hours will fluctuate based on the needs of the employer. Work requirements may include an employee working long enough to be eligible for overtime wages.

Who is eligible for overtime and when is it triggered? What are the federal laws on overtime? Do states have their own laws that go beyond what the federal government mandates? In this article we will answer these and other questions about laws covering overtime wages.

Exempt vs. Nonexempt Employees

If you ask most people what the difference is between exempt and nonexempt employees you will often be told that exempt employees are salaried and nonexempt are not. Well, that is not always true. You can be salaried and still be considered nonexempt, and eligible for overtime pay.

Exempt Employees:
• Salaried
• Earn at least $455 a week
• Are not eligible for overtime pay
• Included in a limited number of job categories

Nonexempt Employees:
• Hourly or salaried
• No limits on pay
• No restrictions on job categories
• Eligible for overtime pay

Overtime Laws at the Federal Level

The federal government enacted the Fair Labor Standards Act (FSLA) in 1938 to create the federal minimum wage and provisions for providing overtime to nonexempt employees. FSLA has been amended several times since then to address issues such as changes in the minimum wage and pay based on gender or age.

FSLA mandates that nonexempt workers be paid overtime at a rate not less than one and one-half times their regular rate for any work beyond 40 hours during a work week. It is worth noting that at the federal level, the trigger for overtime is 40 hours during the week and not after 8 hours on any given day.

For example, an employee could work 10 hours on one day, 8 hours for three days in a row, and after working 6 hours on the fifth day, be sent home by the employer without being eligible for overtime. This is because they worked 40 hours for the week. The 10 hour day they put in does not make them eligible for overtime at the federal level.

Overtime Laws at the State Level

However, several states have laws that do require overtime be paid to those employees who work more than 8 hours in a day. Alaska, California, Nevada, Puerto Rico and the U.S. Virgin Islands all have overtime laws that require payment for any day where more than 8 hours has been worked. Colorado requires daily overtime after 12 hours.

States may also have exemptions from their overtime laws based on company size. For example, Alaska requires employers to pay overtime after 8 hours have been worked in a single day. But, if the company has less than four employees, they are exempt from this requirement.

What to do With Tipped Employees

Under FSLA, a tipped employee is one who regularly receives more than $30 each month in tips. For most service people who rely on tips, $30 a month is an easily met threshold.
To calculate how much overtime to pay a tipped employee, an employer uses a formula that calculates the overtime wage minus a tip credit that is equal to the difference between the minimum wage for nonexempt employees and the minimum wage for tipped employees. If the federal overtime wage is $10.88/hr., subtracting the tip credit of $5.12/hr. means that overtime wage for the tipped employee is $5.76/hr.

FSLA is like an umbrella covering overtime requirements in the United States. Many states have passed legislation that provides additional protections or wages to their workers. It is always best to lookup these differences for each state. The department of labor for each state is a great starting point.