Introduction: The Cost of Extra Hours
Overtime isn’t just an employee perk—it’s a legal requirement that can lead to significant financial penalties if ignored. Employers who fail to properly compensate workers for extra hours often face lawsuits, Department of Labor investigations, and damage to their reputation.
Understanding overtime laws is essential to staying compliant and protecting your business from costly mistakes. Let’s break down what you need to know about overtime pay and how to avoid legal pitfalls.
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What Is Overtime?
📸 Suggested Image Keywords: "clock and paycheck concept," "employee working late," "time tracking for payroll"
Under the Fair Labor Standards Act (FLSA) and New York State law, overtime must be paid at 1.5 times the regular hourly rate for non-exempt employees who work more than 40 hours in a workweek.
Standard Overtime Calculation:
If an employee earns $20/hour, their overtime rate is $30/hour ($20 × 1.5).
If they work 45 hours in a week, the additional 5 hours must be paid at $30/hour.
Total pay for the week: (40 × $20) + (5 × $30) = $950.
Common Misconceptions:
Overtime is not based on daily hours—only on weekly totals, meaning an employee must work more than 40 hours in a single workweek, not averaged over two weeks or a pay period.
Even salaried employees may qualify for overtime unless they meet exemption criteria. Understanding these exemptions is crucial to compliance and avoiding costly misclassification errors. For a more detailed breakdown of overtime exemptions, including which employees qualify and how to properly classify them: Misclassified? The Risk of Getting Overtime Exemptions Wrong.
Bonuses, commissions, and incentives may affect overtime calculations, sometimes leading to underpayment if improperly factored in. This issue is a major source of legal disputes and compliance risks—particularly when employers fail to conduct proper overtime 'true-ups.' For a deeper dive into this topic, check out our upcoming article: [Overtime True-Up Nightmare: How to Avoid Costly Underpayments](Insert Link).
Employer Pitfalls: When Things Go Wrong
Meet Smith & Co., a retail store that routinely asked employees to stay late to finish tasks but didn’t track or pay for overtime. Five employees each worked 8 hours of unpaid overtime per week for 50 weeks per year, earning $20/hour. A former worker filed a complaint, leading to a DOL audit that uncovered violations.
Step-by-Step Financial Breakdown
Unpaid Overtime per Employee:
8 overtime hours per week × $30/hour overtime rate = $240/week
$240/week × 50 weeks = $12,000 per employee
Total Unpaid Overtime (5 Employees):
$12,000 × 5 employees = $60,000
Statutory Penalties (Double Damages):
$60,000 × 2 = $120,000
Wage Theft Prevention Act (WTPA) Penalties:
$10,000 per employee × 5 employees = $50,000 [(Learn more about WTPA penalties)](Insert Link)
Attorney’s Fees:
$5,000
💰 Total Financial Liability: $235,000
Ignoring overtime laws doesn’t save money—it costs businesses far more in the long run.
Action Steps: How to Stay Compliant
Track Hours Accurately – Use time-tracking software to document work hours.
Pay Overtime Correctly – Ensure all non-exempt employees receive time-and-a-half for hours over 40.
Classify Employees Properly – Review exemption rules to ensure employees are correctly categorized.
Account for Bonuses & Commissions – These must be factored into the regular rate for overtime calculations.
Train Managers – Ensure supervisors understand that unauthorized overtime still requires payment.
📥 Downloadable Takeaway: Overtime Pay Compliance Checklist
[Click here to download your free Overtime Pay Compliance Checklist] (Insert Link)
Final Thoughts: Fighting the Good Fight
Fair pay isn’t just about compliance—it’s about valuing employees and creating a strong, legally sound business. Missteps in overtime pay can lead to significant financial consequences, but with the right policies and practices, you can avoid costly penalties and ensure your business operates ethically.
If you need help reviewing your overtime policies or handling an audit, reach out today.
Fighting the Good Fight.
