Overtime Pay: 80% of American Employees are Entitled. Are you?

“I’ve got all the money I’ll ever need
if I die by four o’clock.”

- Henny Youngman 

ACTUAL CASE HISTORY*Melanie was employed for four years by an accounting firm. Her title was Executive Computer Specialist, and her primary duties were those most people would call “trouble-shooting.” That is, whenever a firm partner or a member of the firm’s executive team had a computer problem, Melanie was called in to fix it.

Of course, emergencies do not neatly schedule themselves between 9:00 am and 5:00 pm. As you might imagine, Melanie sometimes received calls at 5:00 pm, requiring she work through dinner, and even later hours, to fix a problem. And sometimes, too, she received calls on the weekends requiring weekend work. She was quite good at what she did, and was always considered a “preferred fixer.” Over her four years with the company, her weekly salary rose to $2,200, which yielded Melanie a yearly income of $114,400. 

Unfortunately, Melanie received a notice that, due to cost cutting, her position was being eliminated, and then outsourced. For severance, Melanie was offered four weeks salary, that is, one week for each of her years with the company, for a total of $8,800. On the advice of her friends, she consulted us to review and discuss her severance agreement.

As is our custom when we are consulted, we first interviewed Melanie to learn the facts, events and circumstances of her employment. We also carefully reviewed the severance agreement Melanie was being asked to sign. As is almost always the case, Melanie was being offered some severance monies provided, however, that she sign an agreement releasing any claims she might have against her employer.

Our interview of Melanie did not find any legal claims she might have against her employer, with one major exception: Melanie, like most people who work in the U.S., was entitled to overtime for any hours she had worked over 40 hours in a week. However, she had never been paid overtime. When we calculated the amount of time Melanie had put in over 40 hours in a week, and the amount of overtime pay she was due – but had not been paid – we found that her employer actually owed Melanie over $115,000. Wow. And, by federal law, Melanie might even be entitled to double that amount, that is, $230,000. Wow, wow. Still further, by federal law, Melanie might also be entitled to interest on what she was owed, attorneys fees and Court costs if she went to court. Wow, wow, wow. So, it turned out Melanie was being offered $8,800 to give up a very solid legal claim for $230,000, perhaps more. That made no sense to us, and that made no sense to Melanie, either.

We contacted Melanie’s employer by a letter to the CEO, and after a few weeks of negotiations, achieved a settlement for Melanie: $100,000, provided she (a) release all of her legal claims, including the claim for unpaid overtime pay, and (b) maintain confidentiality about this entire matter. Her employer, it seemed, was concerned both (i) about what a jury might award Melanie, and (ii) that other employees might learn their rights to overtime pay, and then exercise those rights, as Melanie was doing, at a very significant expense to it.

Nice increase in severance: from $8,800 to $100,000, all because Melanie learned her legal rights. Education does, indeed, pay off.

LESSON TO LEARN: The vast majority of employees in the U.S. are entitled to time-and-one-half pay for any hours they put in over 40 in a week, by a federal law called the Fair Labor Standards Act, or “FLSA” for short.  FLSA’s coverage includes hourly and salaried employees, and there is no strict income limit on eligibility, as explained below. Many states have state overtime laws that give employees even greater overtime benefits, as well as broader eligibility to overtime pay.

Historically, many employees have not received overtime pay to which they have been legally entitled due, primarily, to ignorance of the law by both employees and employers. In recent difficult financial times, even more employees are being denied overtime pay to which they are legally entitled due to conscious cost-cutting efforts by employers.  

Chances are that you are entitled to overtime pay for time you put in over 40 hours in a workweek. To learn the basics of overtime pay eligibility under FLSA, just read below. You just might be as fortunate as was Melanie.   

WHAT YOU CAN DO: To find out if you are entitled to overtime pay, simply consider these guidelines. If you believe you may be entitled to overtime pay but are not receiving it, consider the suggestions below to remedy that situation:  

1. All employees are presumed to be entitled to overtime pay, unless they fit into one of the categories of employees who are considered “exempt” from overtime by the FLSA – The way the FLSA reads, every employee is entitled to one-and-one-half times their usual hourly rate of pay for every hour worked after working 40 hours in a work week UNLESS the employee fits into one of the “exemptions.” That presumption, though, can be overcome by your employer if it identifies the specific exemption you (and your duties) may fit into. While the presumption can be overcome, it is up to an employer who does not pay an employee overtime to provide the reason why that employee is “exempt” from overtime, according to the FLSA.  

2. Do not presume that having a weekly or monthly “salary” automatically makes you “exempt” from overtime pay; it does not – Many people mistakenly believe that employees with weekly or monthly salaries are, for that reason, automatically not entitled to overtime pay because they think salaried employees do not have “hourly rates of pay.” Receiving a salary does not mean you are automatically “exempt” from the right to collect overtime pay. To calculate an “hourly rate” for a salaried employee, you simply take the weekly salary and divide it by 40. So, as an example, if your weekly salary is $800, dividing 800 by 40 gives you an “hourly rate” of $20, and an hourly “overtime rate” that is 1-1/2 times that, that is, $30 per hour.  

3. “Executive” Exemption – This exemption is intended to apply to those who run companies and their divisions. You are not eligible for overtime pay if you fit under this exemption, but only if all of the following tests are met: (a) Your “Primary Duty” is managing the organization, or a department or division of it; (b) You oversee the efforts of two or more full-time employees; (c) You have authority to hire or fire employees; and (d) You receive a weekly salary of $455 or more. 

4. “Administrative” Exemption – This exemption is intended to apply to those who are in management positions. You are not eligible for overtime pay if you fit under this exemption, but only if all of the following tests are met: (a) Your “Primary Duty” is work managing the enterprise’s operations or customers; (b) Your “Primary Duty” includes the exercise of discretion and independent judgment regarding significant matters; and (c) You receive a weekly salary of $455 or more.

5. “Learned Professional” Exemption – This exemption is intended to apply to those who are highly educated and trained in a specific area. You are not eligible for overtime pay if you fit under this exemption, but only if all of the following tests are met: (a) Your “Primary Duty” is performing work requiring advanced knowledge, which is predominantly intellectual in nature; (b) Your duties require the consistent exercise of your advanced knowledge and judgment and discretion; (c) Your advanced knowledge is in a field of science or learning, and requires a long course of specialized instruction; and (d) You receive a weekly salary of $455 or more.   

6. “Highly Compensated” Exemption – This exemption is intended to apply to employees who earn a significant livelihood AND customary and regular aspects of their work would put them in other “exempt” categories, above. You are not eligible for overtime pay if you fit under this exemption but only if all of the following tests are met: (a) You earn $100,000 or more; (b) Your “Primary Duty” includes performing office or non-manual work; and (c) You customarily and regularly perform at least one of the exempt duties or responsibilities of an exempt “executive,” “administrative” or “learned professional” employee, described above.  

7. “Commissioned” Exemption – This exemption is intended to apply to commissioned sales employees of retail or service establishments. You are not eligible for overtime pay under the FLSA if you fit under this exemption but only if both of the following tests are met: (a) More than half of your earnings are from commissions and (b) Your earnings average more than 1.5 times the minimum wage. Note that under this exemption, you may be entitled to overtime pay one week, and not entitled to overtime pay the next week,    

8. “Creative” Exemption – This exemption is intended to apply to writers, producers, directors and others in the creative fields. You are not eligible for overtime pay under the FLSA if you fit under this exemption but only if all of the following tests are met: (a) Your “Primary Duty” in performing work that requires talent, originality, invention or imagination in an artistic or creative enterprise, and (b) You receive a weekly salary of $455 or more.

9. “Outside Sales” Exemption – This exemption is intended to apply to employees who regularly travel to clients and call on them to make sales. You are not eligible for overtime pay under this exemption under the FLSA but only if all of the following tests are met: (a) Your “Primary Duty” is making sales, or taking sales orders from customers, and (b) Your work requires that you are regularly away from the employer’s place of business.

10. Three Important Notes about what we call the “Duty-Related Exemptions,” above – (i) Note that, in the above exemptions, “duties” make all the difference. Titles do not mean anything in the analysis of whether a person is entitled to overtime, or is exempt because of one of the above “Duty Exemptions.” (ii) “Primary Duty” means “the principal, main, major or most important duty that the employee performs. Determination of an employee’s “primary duty” must be based on all the facts of a particular case, with the major emphasis on the character of the employee’s job as a whole. (iii) “Customarily and regularly” performs a duty means greater than occasional but may be less than constant, and includes work normally and recurrently performed every workweek but does not include isolated or one-time tasks.

11. Other “Specified” Exemptions – The FLSA law also provides that certain, specified occupations are exempt from overtime. Among the more common specified occupations are the following: aircraft salespeople; airline employees; amusement/recreational employees in national parks; babysitters on a casual basis; boat salespeople; buyers of agricultural products; companions for the elderly; rural elevator workers; domestic employees who live in; farm implement salespeople; federal criminal investigators; firefighters in small fire departments (less than five firefighters); fishing; forestry employees of small firms; fruit and vegetable transportation employees; homeworkers making wreaths; house parents in non-profit educational institutions; livestock auction workers; local delivery drivers and drivers’ helpers; lumber operations employees in small firms; motion picture theater employees; newspaper delivery people; newspaper employees of small newspapers; police officers working in small police departments (less than five officers); radio station employees in small markets; railroad employees; seamen at sea; sugar processing employees; switchboard operators; taxicab drivers; television station employees in small markets; and truck and trailer salespeople.

12. While the “Duty-Related Exemptions” and “Specified Exemptions” seem  numerous, they apply only to a tiny percentage of the workforce – Reviewing the numerous exemptions noted above, you may get the impression that many, perhaps even most, employees are exempt from being entitled to overtime pay. The truth is that very few employed people are exempt from entitlement to overtime pay. Some people say that 80% of the U.S. workforce is entitled to overtime, and that of those people, 70% are not getting paid the overtime they deserve.      

13. One Important Note about what we call the “Specified Exemptions” – While the “Specified Exemptions” are listed by title, titles are not truly determinative. For example, if an employee’s primary job is to be a “receptionist,” but he or she was given the title “driver’s helper” he or she would still be entitled to overtime, despite that title.

14. Bear in mind: Your state may provide you even better Overtime Benefits and/or easier Overtime Qualification – Many states provide employees in their states (a) greater overtime benefits, and (b) easier overtime qualification criteria, than does the FLSA. If you have any questions or concerns about overtime, you should devote some time and energy to reviewing the website of your state’s Department of Labor or its equivalent employment rights agency.    

For example, many states also (a) provide longer time periods in which to sue for unpaid overtime (some up to six years), and (b) require that delinquent employers pay the legal fees of employees who have been denied overtime pay.

15. What to do if you believe you are being (or have been) illegally denied overtime pay – To determine if you are, or in a previous job were, due overtime pay, simply follow this analysis: “I am presumptively due overtime, unless I fit into one of the ‘Duty Exemptions’ or the ‘Specified Exemptions.’” In most cases, the answer is pretty clear.

If in your case the answer is not clear, you might either (a) consult with an experienced employment attorney, (b) try to review the applicable U.S. Department of Labor regulations on the subject [which can be found at www.dol.gov, and click to “wages,” and then click to “overtime”] or (c) bring the issue to the attention of your employer, or former employer, because it is the employer’s job to determine if it has a valid exemption from the legal requirement to pay you overtime pay.

A. If your concern is regarding a Current Employer, consider an anonymous letter or complaint: If you bring the issue of non-payment of overtime to your current employer, you should bear in mind that your doing so may not make your employer happy. In fact, your employer may resent your doing so, and may want to “make life difficult” for you in retaliation. Though, under the FLSA you are legally protected from retaliation in this situation, we all know that employers can be subtle in how and when they “get even.” For this reason, an anonymous letter to your employer, raising the issue of overtime pay about a group of employees of which you are a member, may be wisest. While some people might view anonymous letters as “sneaky,” I wholeheartedly consider them often totally justified, and a matter of carefully protecting yourself and your family.

You might also consider filing an anonymous complaint with the U.S. Department of Labor, as it is their job to investigate such complaints and, if they find a violation of FLSA, they will usually try to negotiate a resolution without Court action. For information on how to initiate an anonymous overtime complaint to the Wage and Hour Division of the U.S. Department of Labor, go to their website at www.dol.gov.    

On our blogsite’s Model Letters section, you can obtain a “Model Anonymous Letter to Your Current Employer Requesting Overtime Pay.” To obtain a copy, just [click here.]

B. If your concern is regarding a Former Employer: In this circumstance, you have far less to lose in seeking unpaid overtime pay. We always recommend a direct letter, sent by email and/or FedEx or UPS, to your former employer in these circumstances – unless a good reason exists not to do so – to avoid either (i) a complaint to the government (which can take a very long time), or (ii) using an attorney (which can be very expensive.) If a direct letter to your former employer does not help, then the other routes – government complaint or using a private attorney – are always available to you.  

On our blogsite’s Model Letters section you can obtain a “Model Letter to Your Former Employer Requesting Unpaid Overtime Pay.” To obtain a copy, just [click here.]

C. Bear in mind that additional sums may be due you, as well: Under FLSA, an employer who does not pay an employee overtime he or she was due may also have to pay the employee “liquidated damages” of an amount equal to the underpayment. So, if you were denied $10,000, your employer may have to pay you $20,000 because of it. In addition, you may be entitled to both (i) interest on the monies owed, and (ii) attorneys fees and court costs if you need to go to Court to collect what is due you.      

16. Don’t Delay: Your time to sue is 2 years, or possibly 3 years from the date of violation – Like most laws, the FLSA limits the time during which you can bring a lawsuit to collect for damages. (Though we don’t recommend suing, your employer may not want to settle any claim on which they could not be sued.) The general FLSA time limit is two years, although if you can prove that your employer “willfully” denied you overtime pay, that time period can be extended to three years. To prove “willful non-payment” of overtime pay the employee must show that the employer denied him or her overtime pay (a) “knowingly,” or (b) with “reckless disregard” for its responsibility. As noted above, some state laws provide employees longer time periods in which to bring overtime-non-payment lawsuits. 

Overtime is a legal right for all employees – except certain “exempted” ones – that our U.S. Congress felt we should all have, and they voted to make it obligatory on all employers. Don’t be afraid, ashamed or lazy about exercising this important and valuable legal right. We’ve now provided you with what you need to know. The rest is up to you.  

SkloverWorkingWisdom™ emphasizes smart negotiating – and navigating – for yourself at work and in your career. Negotiation and navigation of work and career issues requires that you think “out of the box,” and avoid risks at every point in your career. Knowing your legal rights is the first step. Knowing ways to lower and eliminate risks gives you a distinct advantage in navigating workplace life. Knowing ways to avoid and resolve disputes is even more advantageous. Positioning yourself to obtain maximum advantage is perhaps most important. Learning the “in’s and out’s” of doing so is what we are here for. Now, my friend, it’s up to you.        

Always be proactive.  Always be creative.  Always be persistent.  Always be vigilant. And always do what you can to achieve for yourself, your family, and your career. Take all available steps to increase and secure employment “rewards” and eliminate or reduce employment “risks.” That’s what SkloverWorkingWisdom™ is all about. 

*A note about our Actual Case Histories: In order to preserve client confidences, and protect client identities, we alter certain facts, including the name, age, gender, position, date, geographical location, and industry of our clients. The essential facts, the point illustrated and the lesson to be learned, remain actual.     

Please Note: This Newsletter is not legal advice, but only an effort to provide generalized information about important topics related to employment and the law. Legal advice can only be rendered after formal retention of counsel, and must take into account the facts and circumstances of a particular case. Those in need of legal advice, counsel or representation should retain competent legal counsel licensed to practice law in their locale.

Repairing the World –
One Empowered and Productive Employee at a Time ™

© 2012 Alan L. Sklover, All Rights Reserved.