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Overtime Pay Calculation: Best Practices for Staying Compliant with FLSA Rules

Manager reviewing employee work schedules for compliance.

The New York City Comptroller states that companies in the Empire State are now paying 52.5% more on overtime payments compared to 10 years ago. This suggests that businesses are increasingly relying on limited numbers of trusted staff to carry the workload rather than hiring additional employees and may point toward concerns about expanding the company payroll during economic uncertainty. At the same time, the United States Census Bureau supports reports that the past twenty years have seen a relatively steady increase in the percentage of American workers holding multiple jobs. New York companies readily encourage this higher productivity per worker by offering overtime pay. This overtime pay can serve as a vital source of additional income for workers in New York who face serious economic pressures and has the potential to incentivize employee retention by encouraging workers to focus their efforts on a single company. However, offering overtime pay can lead to legal issues for companies in certain situations – especially if they make the wrong calculations. To discuss proper overtime pay calculation in more detail, call (315) 422-1333 in Syracuse, (518) 591-4664 in Albany, or (914) 304-4353 to reach offices in White Plains and the Hudson Valley and speak with Schwab & Gasparini today. 

What Is the Fair Labor Standards Act?

The Fair Labor Standards Act was signed into law by President Roosevelt in 1938, and it applies to all employees throughout the United States. The labor law affects several aspects of employment in New York, including:

  • Minimum wage
  • Overtime
  • Child labor
  • Interstate commerce
  • Tipping
  • Equal pay
  • Age discrimination
  • Paid vacation

The United States has amended the FLSA many times, giving workers additional rights and protections throughout the decades. The bill continues to go through amendments in the modern era, and in 2016, Congress altered it once again to include the Wage Theft Prevention and Recovery Act. 

The Fair Labor Standards Act Contains Strict Overtime Rules

The FLSA lays out two clear rules regarding overtime pay:

  • Overtime begins as soon as an employee completes 40 hours of work in a single week
  • Overtime must be at least 1.5 times the normal pay rate

How Does the Fair Labor Standards Act Affect Overtime in New York?

The FLSA has several implications for New York employers. Many of these concern the scheduling of work weeks for individual employees, which may or may not be the same across the entire company, and requirements for monitoring and documenting hours worked. Some additional considerations relating to employee classification are determining which workers must legally be paid overtime vs. which workers an employer might wish to offer overtime pay, often as an incentive for rapid project completion or crisis management. 

What Is the Proper Way To Calculate Overtime in New York?

Overtime pay calculation is based on hours worked by a single employee within a federally defined work week. While most desk calendars and day planners assume that a work week begins at 9:00 a.m. on Monday and ends at 5:00 p.m. on Friday, the FLSA defines a “workweek” as seven consecutive 24-hour periods totaling 168. Any accurate overtime pay calculation for FLSA compliance must consider this work week definition. 

A careful reading of the FLSA serves to clarify a number of other key definitions and common misconceptions:

  • Workers do not automatically get overtime pay for working on Saturdays or Sundays
  • There is no limit on how many hours an employee may work within a single workweek
  • The FLSA does not require employers to pay overtime for work completed on holidays
  • Making calculations based on average hours worked is not permitted over a period of over two weeks
  • Companies must make overtime payments on regular paydays

Workweeks vs. Calendar Weeks

New York employers thinking outside their desk calendars may mistakenly assume that a “workweek” automatically extends from Monday to Sunday. However, the FLSA clarifies that a workweek does not necessarily need to coincide with a normal calendar week. While the number of hours involved is precisely delineated by United States law, meaning that a “workweek” as defined by the FLSA will necessarily end 168 hours after it begins, employers enjoy significant latitude in when each work week for their company begins, and whether all employees will adhere to the same working week schedule. 

Defining Employee Workweeks

The Department of Labor states that a workweek may begin “on any day” and “at any hour of the day.” Once they define these workweeks, however, companies must adhere to them when making overtime calculations. In other words, it is not permissible to tell an employee that their work week begins on Thursday at 8:00 a.m., then on Monday telling them that the work week schedule has changed and will now start on Wednesday afternoons at 3:00 p.m. –– thereby preventing the employee from accruing more than 40 hours in a single “workweek.” Different employees within the same company may follow additional work weeks, but any employee’s work week must remain the 168 hours comprising seven consecutive 24-hour periods specified by federal law.

Calculating Hours Within a Workweek

Overtime pay calculation must consider not only days but also specific hours. Theoretically, a worker may be entitled to overtime pay depending on whether they started work at 8:00 a.m. or 9:00 a.m. on a certain day. When employees within a single organization have different work weeks, employers must consider the specific schedule of each worker when making overtime calculations. A company might have a worker shift with a workweek spanning from Wednesday to Saturday and a second shift that works from Monday to Friday. Within these shifts, specific workers may arrive early, take sick days, or work later than their colleagues. Employers must consider all of these factors when making their overtime calculations. 

Some Workers Are Exempt

The FLSA and the New York Department of Labor identify several categories of workers exempt from overtime regulations. These workers include:

  • Executive employees
  • Administrative employees
  • Professional Employees
  • Certain salespeople
  • Government employees
  • Farm laborers
  • Certain volunteers
  • Certain interns
  • Certain apprentices
  • Taxi drivers
  • Clergy members
  • Religious workers
  • Camp counselors
  • Fraternity or sorority workers
  • Student association workers
  • Faculty association workers
  • Certain babysitters

Only Hourly Employees Get Overtime Pay

As a general rule, overtime regulations only apply to “employees.” In other words, New York companies do not need to pay independent contractors overtime. In addition, salaried employees do not receive overtime pay – although their contracts may stipulate certain overtime incentives on a case-by-case basis. Finally, some employees are eligible for overtime pay despite working for organizations that may have some connection to the government. These eligible quasi-government workers may include:

  • Charter school employees
  • Private school employees
  • Non–profit organization workers
  • Non-teachers working for school districts

What Happens if a Company Makes the Wrong Overtime Calculations? 

If a company in New York fails to make the correct overtime calculations, it may face civil employment lawsuits. Aggrieved employees may sue their employers and seek compensation for all unpaid overtime. While a few weeks of overtime pay may not seem like a tremendous sum, employees can seek up to six years of unpaid overtime. 

Companies that make incorrect calculations over a period of many years may suddenly find themselves facing serious losses when employees sue. If the errors occurred across the entire payroll system, thousands of employees could seek years of unpaid overtime simultaneously. Schwab & Gasparini can help companies avoid this eventuality by offering advice for proper, FLSA-compliant payroll systems.  

Get in Touch With a New York Business Litigation Attorney

While many workers in New York appreciate overtime opportunities, they may file lawsuits against employers who fail to make proper calculations. To increase productivity in an efficient manner while avoiding negative legal consequences, it is important to follow best practices when creating and overseeing overtime work opportunities. Experienced New York business litigation attorneys can offer companies guidance as they review overtime policies. Call (315) 422-1333 in Syracuse, (518) 591-4664 in Albany, or White (914) 304-4353 in White Plains and Hudson Valley and schedule your consultation to discuss overtime pay calculation with a dedicated New York business attorney at Schwab & Gasparini today.


Tue Dec 5 2023, 12:00am