How to Watch out for Out-of-State Overtime Laws
Shop OurSolutions  ►
Priority Number

State vs. Federal Overtime Rules: Proceed with Caution to Avoid Legal Snags

By Ashley Kaplan on 9/15/2014
federal vs. state overtime rules

The Fair Labor Standards Act (FLSA) requires covered employers to pay overtime to employees working 40 or more hours per week – at a rate of one-and-a-half times their regular hourly rate. The wage and hour law applies to businesses earning $500,000 or more in annual sales, and executive, administrative and professional employees who meet specific job and salary criteria are exempt from overtime pay.

Follow these federal guidelines and you’ll steer clear of wrongdoing, right?

Not necessarily.

Depending on where you do business, you may need to be aware of state-level requirements, as well. Where there are differences, you must comply with the rules that are more favorable to the affected employee.

Overlooking this simple fact could make you the target of a costly and time-consuming legal proceeding.

Case in point: United Parcel Service (UPS) agreed to pay $18 million to settle claims for unpaid overtime by a group of part-time supervisors in California. While federal law extends overtime to non-exempt employees clocking 40+ hours per week, California state law specifies that employees be paid overtime after eight hours in a workday. This daily overtime provision, coupled with the company wrongly classifying the supervisors as exempt managers, got UPS in trouble under California’s more generous state overtime laws.

California isn’t the only state with laws that differ from the FLSA. Alaska and Nevada also measure overtime on a daily basis, along with a handful of states targeting employers that the FLSA doesn’t (such as small and local companies) or extending overtime benefits to additional types of employees.

With the U.S. Department of Labor’s Wage and Hour Division reporting more FLSA violations than ever – along with a rise in employee lawsuits – employers need to get on the right side of the overtime rules.

Here are some important compliance considerations:

Understand your state overtime rules and how they vary from federal law. Always follow the law most beneficial to the employee’s situation.
Pay special attention if you’re involved in “interstate commerce,” meaning you conduct business between states. Even if you’re a small company grossing less than $500,000 annually, the overtime rules apply if your company engages in business activities in other states, such as sending or receiving products interstate or working with out-of-state customers.
Don’t misclassify workers to avoid overtime pay. Look beyond the job title and carefully consider the actual work functions to determine FLSA classification. You’re exposing your company to risk if you skirt the rules by calling a rank-and-file employee an “assistant manager” – or compensating non-supervisory individuals with salaries instead of hourly wages.
Be certain any employees ineligible for overtime pay fall clearly under the executive, administrative or professional exemptions – sometimes called “white-collar” exemptions. In addition to holding specific job responsibilities (such as supervising others and making essential business decisions), these employees must be paid a salary of at least $455 a week (or $23,660 a year) to be exempt. Exemptions exist for outside sales employees and certain computer-related employees, as well.

In addition to holding specific job responsibilities (such as supervising others and making essential business decisions), these employees must be paid a salary of at least $455 a week (or $23,660 a year) to be exempt. Exemptions exist for outside sales employees and certain computer-related employees, as well. ​​

Tags
Labor Law