As a business owner, keeping up with labor laws and regulations is essential, especially when it comes to understanding overtime work. One important aspect to grasp is that overtime pay laws apply differently to exempt and non-exempt employees.
An employee is considered exempt if they meet two requirements: 1) they receive a salary, and 2) their job duties fall into an exempt classification. On January 1, 2023, the minimum salary threshold in California increased to $64,480. Let’s take a look at an up-to-date summary of the current overtime pay laws and share some helpful tips on how to make sure your business stays compliant with these regulations.
What is Overtime Pay?
The Fair Labor Standards Act (FLSA) is the federal law responsible for setting the minimum wage, overtime pay, and recordkeeping requirements for employees across the United States. According to the FLSA, employees who work over 40 hours in a workweek are entitled to overtime. Overtime is calculated at one and a half times (1.5x) their regular rate of pay. If, however, you have California employees, overtime accrues over 8 hours per day at one and a half times (1.5x) their regular rate of pay. If the employee works more than 12 hours in a day, overtime accrues at two times (2x) their regular rate of pay.
However, it’s important to note that not everyone is eligible for overtime pay. The FLSA splits employees into two categories: exempt and non-exempt. The difference between non-exempt employees and exempt employees is that only non-exempt employees are entitled to overtime pay. This is because typically, exempt employees are those who receive a salary above the threshold and meet specific job duties.
The Supreme Court Weighs in on Overtime Pay
In February 2023, the Supreme Court shed light on how employers should handle overtime laws. Although much of California law is more restrictive than the FLSA, the ruling was notable as it emphasized the need for accurate classification of employees as either exempt or non-exempt and underlined the importance of diligent recordkeeping for wage and hour compliance.
In addition, the Court’s decision also revealed the possible repercussions of noncompliance, which could range from back wages and penalties to criminal sanctions in severe cases. As an employer, it’s crucial to use this ruling as a cue to reevaluate your policies and procedures, making sure they conform to the latest laws and regulations.
How to Keep Your Business Compliant with Overtime Laws
To stay on top of overtime laws and avoid potential liabilities, employers should:
- Verify employee classifications: Consistently evaluate and update employee classifications to accurately represent each individual’s job responsibilities and salary level. Doing so will help guarantee that non-exempt employees receive appropriate compensation for any overtime hours worked.
- Train managers and supervisors: Equip managers and supervisors with a thorough understanding of overtime laws, enabling them to accurately monitor and report employee hours. This encompasses the distinctions between exempt and non-exempt employees and the ability to recognize when overtime pay is due.
- Adopt a dependable timekeeping system: Implement time-tracking systems that accurately capture hours worked, including overtime. This ensures that non-exempt employees are compensated correctly and that comprehensive records are readily available if an audit or wage & hour investigation arises.
- Promote open communication: Encourage a culture of transparency and open communication between employees and management when it comes to overtime policies and procedures. Make sure that employees understand their rights to overtime pay and know how to report any concerns or discrepancies.
- Stay in the know: Keep an eye on updates to labor laws and regulations, including court rulings and changes to state or local laws that may impact your business. This will help you stay compliant and reduce the risk of expensive penalties or litigation.
Ask an Employment Attorney
Being well-versed in and adhering to overtime laws is crucial for any business. With recent Supreme Court rulings and ever-evolving regulations, it’s more important than ever for employers to stay informed and take the necessary steps to ensure their business remains compliant. By reviewing employee classifications, training managers, implementing accurate timekeeping systems, and encouraging open communication, employers can minimize the risk of non-compliance and create a fair and lawful workplace for all employees.
If you’re unsure whether your employees are entitled to overtime pay or not, it’s always a good idea to consult with an employment law firm, like Hackler Flynn & Associates. We can help ensure that your business is in compliance with the FLSA and other wage and hour laws. Feel free to reach out to take proactive steps to comply with the law so you can save your business from costly lawsuits and penalties in the future.
DISCLAIMER: Content within this post should not be considered legal advice and is for informational purposes only. Communications made through this post do not create an attorney-client relationship. Hackler Flynn & Associates is not responsible for any content that you may access from third-party resources that may be accessed through or linked to this post.
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