The FLSA and Overtime Pay

Abstract

Many employers are unwittingly violating a U.S. Department of Labor pay rule, and they could pay a high price as a result. In fact, U.S. companies could owe as much as $39 billion in back pay. The rule on overtime compensation has been in effect since 1954, but it has come to the fore, mostly in economically painful ways, because of a handful of recent court decisions and increased Labor Department enforcement action against companies. The rule states that employers must pay hourly employees at one-and-a-half times their hourly rate for each hour over 40 they work in a week. Employers are not required to pay overtime to employees who are paid on a salary basis and who meet certain requirements related to duties. However, employers often don't know which employees qualify for overtime, when to pay it, or whether to pay time and a half or compensatory time. In fact, violations are so common that some estimate that workers would get an additional $19 billion a year if the rules were observed. Perhaps it's time to revisit the provisions and interpretations of the 1938 Fair Labor Standards Act.