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July 10, 2018
August 8, 2018

Overtime Policies You Must Avoid

Sheila Grosdidier

While you would never set out to violate labor laws, such as those governing Overtime Pay, is it possible you are doing so unintentionally? Here are 10 unlawful overtime policies. Check these against your hospital policies and your employee manual:

You cannot have a policy stating that “unauthorized overtime will not be paid.” The Federal Fair Labor Standards Act (FLSA) clearly states that overtime must be paid whenever an employee works more than 40 hours in a work week and some states also require overtime pay in additional circumstances – regardless of whether it was authorized in advance. So, what can you do to address this very real problem? You can never withhold pay but you can discipline employees for violating the non-permission policy.

Giving employees time off instead of paying overtime is prohibited for all private sector employers. This is often called “comp time” and it is an unlawful practice. If the employee works the hours, they must be paid.

Working “off the clock” is also an unlawful practice. It doesn’t matter if you require it of an employee or simply allow it – you should make sure you have a policy that expressly prohibits off-the-clock work and make sure you have controls in place to prevent it from happening.

You cannot pay overtime at a flat sum. Regardless of whether the sum offered may be greater than what is owed on a per-hour basis, you must calculate and pay overtime to non-exempt employees on a per-hour basis.

Failing to count all “hours worked” when calculating overtime is also unlawful. According to FLSA, hours worked include not only productive time (time actually spent working), they include certain non-productive times, such as rest breaks, travel time, and training time. Be sure you take into account all non-productive times when determining whether overtime is due.

Another area that can trip up employers is calculating overtime pay based on the employee’s hourly rate only. Generally, overtime must be paid at one and a half times the employee’s “regular rate of pay”. You can check your state laws for any difference from this policy. An employee’s regular rate of pay includes their hourly rate plus the value of nondiscretionary bonuses, shift differentials and certain other forms of compensation.

Some employers enter unlawful territory when they improperly apply the fluctuating workweek method when calculating overtime. To use the fluctuating workweek method under the FLSA, the employee’s hours must fluctuate from week to week (above 40 hours and below 40 hours); the employee must receive a fixed salary for the workweek regardless of how few or many hours are worked; the employee and employer must have a clear and mutual understanding in writing that the fixed salary is compensation for those hours worked each workweek; the salary must meet the applicable minimum wage rate for every hour worked in those workweeks in which the number of hours worked is greatest; and the employee must receive one and a half times his or her regular rate of pay for overtime hours worked. While the fluctuating workweek method can seem like an attractive option for reducing overtime costs when compared with the standard overtime calculation, there are some caveats to consider. First, some states, including California, expressly prohibit employers from using the fluctuating workweek method for paying overtime. There are also restrictions on the types of deductions that employers can make. This method is a common source of employee lawsuits. Check your state and local law and consult legal counsel as necessary before using this method.

Averaging hours worked over two (or more) workweeks can also cause you problems. According to FLSA regulations, overtime must be calculated on per workweek basis. You are prohibited from averaging hours over two or more workweeks to determine overtime. For example, if an employee works 50 hours one week and 30 hours the second, you must pay 10 hours of overtime for the first week.

The FLSA does not allow you to dock overtime pay. It does allow you to deduct from an employee’s pay for uniforms and certain other items, but deductions are prohibited if it would cut into the employee’s overtime pay or reduce their regular pay below the minimum wage for each state.

And finally, you cannot ask employees to waive their right to overtime. FLSA states that all non-exempt employees are entitled to overtime whenever they work more than 40 hours in a workweek. Employees cannot waive this right even if they were to do so voluntarily.

Overtime policies can protect you and your employees – be sure you are adhering to the FLSA and your state policies to avoid unlawful practices and potential employee lawsuits.

Avoid major liabilities and mistakes by educating yourself on Hiring Law in your state. Sheila Grosdidier is a Senior Certified Professional through the Society for Human Resource Management. You can attend one of VMC's H.R. Boot Camps and learn what you need to properly manage your human resources and stay out of legal hot water. Register today!

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