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Employment law

overtime pay

The Fair Labor Standards Act (FLSA) establishes minimum wage, overtime pay, recordkeeping, and youth employment standards affecting employees in the private sector and in federal, state, and local governments. Covered nonexempt workers are entitled to the current minimum wage. Overtime pay at a rate not less than one and one-half times the regular rate of pay is required after 40 hours of work in a workweek. The FLSA is in the United States Code, at 29 U.S.C. §201. And the relevant rules and regulations are in the Code of Federal Regulations, at 29 C.F.R. §510 to 29 C.F.R. §794.

Wages required by the FLSA are due on the regular payday for the pay period covered. Deductions made from wages for such items as cash or merchandise shortages, employer-required uniforms, and tools of the trade, are not legal to the extent that they reduce the wages of employees below the minimum rate required by the FLSA or reduce the amount of overtime pay due under the FLSA.

Covered nonexempt employees must receive overtime pay for hours worked over 40 per workweek (any fixed and regularly recurring period of 168 hours—seven consecutive 24-hour periods) at a rate not less than one and one-half times the regular rate of pay. There is no limit on the number of hours employees 16 years or older may work in any workweek. The FLSA does not require overtime pay for work on weekends, holidays, or regular days of rest, unless overtime is worked on such days.

Hours worked ordinarily include all the time during which an employee is required to be on the employer’s premises, on duty, or at a prescribed workplace.

The FLSA contains some exemptions from these basic standards. Some apply to specific types of businesses; others apply to specific kinds of work. For example, the FLSA states that employees employed as bona fide executive, administrative, professional, outside sales, and certain computer employees may be considered exempt from both minimum wage and overtime pay. These are sometimes referred to as white-collar exemptions. To be exempt from receiving overtime pay an employee (1) must be paid a salary; (2) must be in one of these white-collar positions; and (3) must be paid more than the minimum weekly salary set by the U.S. Department of Labor.

As of January 1, 2020, the U.S. Department of Labor requires that employees whose salary is equal to or less than $684 a week ($35,568 annually) receive overtime pay, even if they are classified as exempt. Prior to January 1, 2020, employees whose salary was equal to or less than $455 a week ($23,660 annually) were required to receive overtime pay, even if they were classified as exempt.

But employers are not required to pay overtime to employees who are considered highly compensated, as defined by the U.S. Department of Labor. Effective January 1, 2020, a highly compensated employee (HCE) is considered exempt from overtime pay if (1) the employee has a total compensation of $107,432 (or more), including at least $684 a week paid on a salary or fee basis; (2) the employee’s primary duty consists of office or non-manual work; and (3) the employee customarily and regularly performs at least one of the exempt duties or responsibilities of an exempt executive, administrative, or professional employee. Employers can include commissions, nondiscretionary bonuses, and other nondiscretionary compensation in calculating an employee’s compensation and classifying an employee as highly compensated—and therefore exempt from overtime pay.

In Texas, the Fair Labor Standards Act (FLSA) governs minimum wage, overtime pay, recordkeeping, and youth employment. Employees covered by the FLSA must be paid at least the federal minimum wage and receive overtime pay at one and one-half times their regular rate for hours worked beyond 40 in a workweek. Deductions that bring an employee's wages below the minimum wage or reduce overtime pay are not permitted. Certain employees may be exempt from minimum wage and overtime pay if they meet specific criteria related to their job duties and salary level. As of January 1, 2020, employees earning up to $684 per week ($35,568 annually) are entitled to overtime pay unless they meet the criteria for a white-collar exemption. Highly compensated employees earning at least $107,432 annually may be exempt from overtime if they perform certain types of duties. Texas follows these federal regulations and does not have a separate state statute that overrides or supplements the FLSA standards for minimum wage and overtime.

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