What Businesses Need to Know About Overtime Compensation

What Businesses Need to Know About Overtime Compensation

Overtime CompensationAs the economy starts to pick up, many companies are still trying to increase productivity with the staff they have on hand.  Paying for overtime is sometimes preferable to the costs and risks associated with recruiting, hiring and training more staff in an unstable economy.

We often receive questions from employers and employees alike on overtime issues.  This isn’t surprising, as the laws vary state to state, and Washington’s laws differ from federal laws.  One thing to remember is that when labor laws conflict, the law most favorable to the employee applies.

We’ve got the skinny for Washington employers on the ins and outs of overtime!

Which employees are eligible for overtime?

In most cases, you must pay overtime to any non-exempt employee who works more than 40 hours in a work week.  There are some very limited exceptions, and they are listed on L&I’s website.  You, as the employer, can set whatever work week you want, but it must be a defined seven day week.

Can you require your employees to work overtime?

Yes, you can.  If you have an employee who does not want to work the required overtime, you can treat this as a discipline issue in your business.

  • Can you require an employee to work overtime on their scheduled day off?  Again, the answer is yes.
  • Do you have to provide a certain number of days off in between workdays?  No, you don’t.  (Just remember that your employees are people, with lives and families, and at some point they need to recharge and take care of their personal lives.)

It’s a good business practice to inform your staff in advance of your policies on overtime, give them as much notice as possible of the work schedule, and utilize volunteers for extra hours whenever possible.

Can you provide comp time instead of overtime pay?

Sometimes clients ask us if they can just provide comp time to their employees instead of paying them overtime pay.  This is a tricky question.

Washington state law allows employers, at the employee’s request, to provide comp time, accrued at time and a half, to be provided in lieu of overtime pay.  However, federal law only allows this for government workers.  Oftentimes, employees prefer getting an option for comp time, but it does violate the Fair Labor Standards Act.

How do holidays affect overtime?

In weeks where there is a holiday, companies sometimes wonder how that plays into overtime.

Any time paid for days not worked (sick, vacation, or holiday) does not count towards overtime hours.

Often employees who get scheduled to work on a holiday or a normal day off (a Sunday, for example), think they will automatically get paid time and a half or even double time.  You only need to pay time and a half for hours that exceed 40 in the week.  If working a holiday doesn’t put the employee over 40, straight time is all that is required.

Do you have to pay an employee who works unauthorized overtime?

One last question we often get on overtime is whether a company must pay an employee who has worked unauthorized overtime.

This can come up in a lot of different ways.  An employee might clock in a little early and out a little late each day, adding up over the course of a week to an hour of overtime.  Or an employee might not take lunch a day or two, giving them overtime.  Or an employee facing a looming deadline might stay late, take work home, or come in on the weekend, believing they’re doing the best thing for the company.

Whether or not you’ve authorized the overtime in advance, the FLSA states that if an employee is suffered or permitted to work, they must be paid.  And the Department of Labor’s position is that regardless of whether a company has a policy requiring prior authorization for overtime, if an employee works the hours, they must be paid for them.

How can employers control overtime costs?

So what recourse does a company have to hold the lines on their overtime costs?  It becomes a matter of employee discipline.

It’s important that your business does have a policy requiring prior authorization for overtime.  When an employee works overtime without authorization, they should be reminded of the policy, but must still be paid for their hours.  If it happens again, appropriate discipline, up to and including termination, can take place — but again, the employee must be paid for their hours worked.

More information & resources:

There are some exceptions and special regulations for overtime pay in Washington state that affect particular industries and occupations.  For more information, refer to L&I’s website.