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Federal Overtime Law Explained: Updated Rules, Key Facts, and More (2025)
Confused about federal overtime law? This 2025 guide covers updated rules, eligibility, and how to calculate overtime pay accurately.

With U.S. workers losing over $50 billion yearly to wage theft and employers paying $3.24 billion worth of claims between 2017 and 2020 alone, it’s clear that ignorance of federal overtime law benefits no one.
But when rules change unexpectedly and state rules clash with federal provisions, keeping up with overtime laws can sometimes feel like work. Long-standing practices–like paying overtime only after 80 hours of work, which is prevalent in the construction industry–further complicate matters.
As tasks at your job or business keep piling up, you no longer have time to decipher legal mumbo jumbo and just want a quick way to know what’s legal, who’s entitled to overtime pay, and how to calculate it.
This definitive guide gives you a rundown of federal overtime law so you always know who’s owed overtime pay–and make sure to provide/receive it every time.
Federal Overtime Law at a Glance
DEFINITION
What Is FLSA Overtime Pay?
According to the Fair Labor Standards Act (FLSA), overtime pay means paying non-exempt employees 1.5 times their regular hourly rate for any hours worked over 40 in a single workweek.
Overtime pay ensures employees are fairly compensated for extra time on the job.
Double-time pay, where employees are paid twice their regular rate, is a variation of overtime pay. Unlike overtime pay, double-time isn’t required by federal law—it usually depends on state laws or company policies, like in California, where double-time applies after 12 hours of work in a day.
FLSA
What Is the Legal Basis of Federal Overtime Pay?
Federal overtime law is part of the Fair Labor Standards Act (FLSA), a cornerstone of U.S. labor law that ensures workers are treated fairly when it comes to pay, hours, and working conditions. Established in 1938, the FLSA introduced essential protections for employees, many of which still shape workplace standards today.
Key Provisions of the FLSA
The FLSA covers four main areas:
- Overtime Pay: Non-exempt employees are entitled to time-and-a-half (1.5x) of their regular hourly pay for every hour worked over 40 hours in a single workweek.
- Minimum Wage: Employers must pay employees at least the federal minimum wage, currently set at $7.25 per hour, unless a higher state minimum wage applies.
- Recordkeeping: Employers are required to keep accurate records of hours worked and wages paid for all employees.
- Child Labor Protections: Set limits on the types of work and hours minors can perform, aiming to prevent unsafe working conditions for young workers.
DOL
Who Enforces Federal Overtime Law?
The U.S. Department of Labor (DOL) enforces the FLSA through its Wage and Hour Division (WHD). This agency investigates complaints, conducts audits, and ensures employers comply with federal overtime law, including proper employee classification and timely payment of overtime wages.
Weekly Basis
Is Federal Overtime Based on Hours Worked in a Week or a Day?
Under the Fair Labor Standards Act (FLSA), overtime pay is based on hours worked in a single workweek, not hours worked in a day.
A workweek is defined as a fixed and regularly recurring period of 168 hours—seven consecutive 24-hour periods. It can start on any day and at any hour, and employers can set different workweeks for different employees or groups.
Daily overtime rules, such as paying extra for working more than 8 hours in a day, are not required under federal law but may be mandated by certain state laws, like in California. For federal compliance, the focus is on total hours exceeding 40 in a single workweek.
None
Are There Limits on Hours Worked Under Federal Overtime Law?
The Fair Labor Standards Act (FLSA) does not place any limits on the number of hours employees aged 16 and older may work in a single workweek.
However, employers should still consider state laws or company policies that may impose additional limits
$500,000+ Revenues
What Businesses Are Covered by Federal Overtime Law?
Federal overtime law under the Fair Labor Standards Act (FLSA) applies to businesses and employees through enterprise coverage or individual coverage:
1. Enterprise Coverage
Businesses with $500,000 or more in annual gross revenue are covered by the FLSA. This includes companies engaged in sales, production, or services that meet this revenue threshold.
2. Individual Coverage
Employees involved in interstate commerce—such as shipping, receiving, producing, or handling goods across state lines—are covered regardless of the business’s revenue. This also applies to workers handling credit card transactions or processing documents related to interstate commerce. Even support staff, like janitors and guards, are covered if their roles are essential to interstate operations.
$684/week
What Is the Salary Threshold for Federal Overtime Pay?
Under the Fair Labor Standards Act (FLSA), employees must meet specific salary thresholds to be considered exempt from overtime pay.
Here’s a clear breakdown of the current requirements and recent developments:
Current Salary Thresholds
- Standard Exemptions: Employees must earn at least $684 per week (or $35,568 per year) to be classified as exempt from overtime pay.
- Highly Compensated Employees (HCEs): Employees who earn $107,432 or more annually may qualify for exemption if they also meet specific job duty criteria.
Exemption is never based solely on a title—employees must meet all salary and duties requirements outlined in FLSA regulations to be classified as exempt from overtime pay.
What Happened in 2024?
The federal overtime rules almost changed in 2024, but legal challenges prevented the updates from taking effect. Here’s a quick timeline of events:
- April 2024: The Department of Labor (DOL) proposed raising the salary threshold for overtime exemptions to:
- $43,888 annually ($844 per week) starting July 1, 2024.
- $58,656 annually ($1,128 per week) starting January 1, 2025.
- June 2024: A federal judge in Texas temporarily blocked the DOL’s rule, stating that it improperly based eligibility for overtime pay on workers’ wages rather than their job duties
- November 2024: A final court ruling officially voided the proposed rule. The salary thresholds reverted to their previous levels.
What This Means Today
The court’s decision means there are no changes to the current salary thresholds. Employers must continue to follow the existing FLSA guidelines:
While no changes are in place, this case highlights how quickly overtime regulations can shift. Employers should stay informed, regularly review their pay practices, and consult with legal or HR professionals to avoid non-compliance risks.
Who’s Eligible for FLSA Overtime Pay?
Hourly employees are generally entitled to overtime pay. Their regular rate of pay is directly tied to their hourly wage.
If an hourly employee earns above the salary threshold ($684 per week) and performs job duties that qualify them for an exemption (e.g., executive or administrative roles), they may not be entitled to overtime pay. Employers must carefully evaluate both the employee’s salary and duties to determine their overtime eligibility.
Salaried employees earning below $684 per week or not meeting the job duties test for exemptions are eligible for overtime pay.
Employers must pay overtime to these workers, whether they are paid by salary, piece rate, commission, fee, or daily rate, unless explicitly exempt under the FLSA.
Manual laborers and skilled tradespeople, including construction workers, electricians, plumbers, and mechanics, are non-exempt. Even highly paid workers in these roles are entitled to overtime because their work involves skilled physical tasks.
Domestic employees such as housekeepers, nannies, or cooks are entitled to overtime pay if they don’t live in the household where they work. These workers often perform repetitive, time-intensive tasks, aligning them with other non-exempt roles.
Live-in domestic workers, however, may be exempt from overtime but must receive at least the federal minimum wage.
Police officers, firefighters, paramedics, and similar emergency response roles are non-exempt. These high-risk, hands-on jobs qualify for overtime pay regardless of rank or pay.
These roles are exempt if specific criteria are met.
- Executive Exemption: Must earn at least $684 per week, primarily manage departments, supervise at least two full-time employees, and have significant input on hiring or firing.
- Administrative Exemption: Must earn at least $684 per week and perform non-manual work related to management, exercising discretion on significant matters.
- Professional Exemption: Applies to roles requiring advanced knowledge (e.g., doctors, lawyers) or creative professionals (e.g., artists, writers) earning at least $684 per week.
Computer employees are exempt if paid at least $684 per week or $27.63 per hour. The exemption applies to roles like software developers and systems analysts but excludes general IT support or helpdesk workers.
Outside sales employees are exempt if their primary duty is making sales or securing service contracts and they work primarily away from their employer’s location. There is no minimum salary requirement for this exemption.
Employees earning $107,432 or more annually are exempt if they perform at least one duty of an executive, administrative, or professional employee.
Compensation must include at least $684 per week on a salary or fee basis.
Exempt if they work at seasonal establishments like amusement parks or ski resorts operating fewer than seven months a year. This exemption acknowledges the unique financial and operational challenges of seasonal businesses.
Exempt if employed by operations using fewer than 500 man-days of labor in a calendar quarter. Other exemptions include family members working on farms or certain hand-harvest laborers paid on a piece-rate basis.
Employees in certain industries may be exempt under specific provisions. Common exemptions include:
- Seamen on Non-American Vessels: Aligns with international maritime labor standards.
- Drivers Paid on Trip Rates: Applies to local delivery drivers compensated per trip.
- Small Newspaper Employees: Supports operations with circulations under 4,000 copies.
- Taxicab Drivers: Reflects the flexible and variable nature of their work.
- Motion Picture Theater Employees: Acknowledges unique demands of entertainment jobs.
- Small Radio and TV Station Employees: Applies to staff in markets with populations under 100,000.
- Forestry Workers: Covers small-scale operations with fewer than eight workers.
- Cotton and Sugar Processing Employees: Exempt during peak production periods (up to 14 weeks annually).
How to Calculate Federal Overtime Pay
Calculating overtime pay might seem straightforward, but there are important nuances that can trip up even experienced employers. Here’s a detailed guide on how to compute overtime, complete with examples and tips to avoid common mistakes.
Step-by-Step Guide to Calculating Overtime Pay
1. Determine the Employee’s Exemption Status
Only non-exempt employees are eligible for overtime pay under the Fair Labor Standards Act (FLSA). Verify their classification based on salary, payment type, and job duties.
2. Establish the Regular Hourly Rate
For hourly employees, this is simply their hourly wage.
For salaried non-exempt employees, divide their weekly salary by the standard 40-hour workweek to calculate their regular hourly rate.
Example: A salaried employee earns $800 per week.
Regular Hourly Rate: $800 ÷ 40 = $20/hour
3. Calculate the Overtime Rate
Overtime pay is 1.5 times the regular hourly rate.
Example: If the regular hourly rate is $20:
Overtime Rate: $20 × 1.5 = $30/hour
4. Track Hours Worked
Accurately track all hours worked by the employee in a workweek. Overtime kicks in for hours beyond 40 in a single workweek.
Example: An employee works 45 hours in a week.
Overtime Hours: 45 – 40 = 5 hours
5. Compute Overtime Pay
Multiply the overtime hours by the overtime rate.
Example: With an overtime rate of $30/hour and 5 overtime hours:
Overtime Pay: 5 × $30 = $150
6. Add Overtime Pay to Regular Pay
Combine regular pay and overtime pay to determine the total compensation.
Example: If the employee’s regular weekly pay is $800 and overtime pay is $150:
Total Pay: $800 + $150 = $950
Examples of Overtime Calculations
1. For Hourly Employees
- Regular hourly rate: $15/hour.
- Hours worked: 50 in a week.
- Overtime hours: 50 – 40 = 10.
- Overtime rate: $15 × 1.5 = $22.50/hour.
- Overtime pay: 10 × $22.50 = $225.
- Total weekly pay: (40 × $15) + $225 = $825.
2. For Salaried Non-Exempt Employees
- Annual salary: $52,000.
- Weekly salary: $52,000 ÷ 52 = $1,000.
- Regular hourly rate: $1,000 ÷ 40 = $25/hour.
- Overtime rate: $25 × 1.5 = $37.50/hour.
- Overtime hours: 8.
- Overtime pay: 8 × $37.50 = $300.
- Total weekly pay: $1,000 + $300 = $1,300.
3. For Employees with Multiple Hourly Rates
- Worked 20 hours at $15/hour and 30 hours at $20/hour in one week.
- Total pay: (20 × $15) + (30 × $20) = $900.
- Weighted average rate: $900 ÷ 50 hours = $18/hour.
- Overtime rate: $18 × 1.5 = $27/hour.
- Overtime hours: 10.
- Overtime pay: 10 × $27 = $270.
- Total weekly pay: $900 + $270 = $1,170.
4. For Piece Rate Employees
For employees paid by the piece, their regular rate is calculated by dividing total weekly earnings by total hours worked. Overtime is then paid at half the regular rate for hours worked over 40, in addition to their full piecework earnings.
Let’s say an employee earns $405 in a 45-hour week:
- Regular rate: $405 ÷ 45 = $9/hour.
- Overtime rate: $9 × 0.5 = $4.50/hour.
- Overtime pay: $4.50 × 5 overtime hours = $22.50.
- Total earnings: $405 + $22.50 = $427.50.
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State vs. Federal Laws
StateOvertime Thresholds
Alaska, California, Nevada: Overtime applies after 8 hours/day and/or 40 hours/week.
Kansas: Overtime applies after 46 hours/week.
Minnesota: Overtime applies after 48 hours/week.
Most other states use the 40 hours/week threshold.
Federal Overtime Threshold
Overtime applies after 40 hours in a 7-day workweek.
StateDaily Overtime
California: 1.5x after 8 hours/day, 2x after 12 hours/day.
Nevada: 1.5x after 8 hours/day for employees earning less than 1.5x the minimum wage.
Colorado: 1.5x after 12 hours/day or 12 consecutive hours.
Most other states follow federal law, hence no daily overtime requirement.
FederalDaily Overtime
No daily overtime requirement.
StateOvertime Rate
California: 2x for hours beyond 12/day or 8 hours on the 7th consecutive workday.
Most states follow the 1.5x rate for weekly or daily overtime.
Federal Overtime Rate
1.5 times the regular rate of pay for overtime hours.
StateOvertime Threshold for Salaried Employees
California, Alaska: Salary thresholds for exemption are based on multiples of the state minimum wage (e.g., California requires at least twice the state minimum wage for exemption).
Maine: Annual salary threshold equals 3,000 times the state minimum wage.
Other states often default to the federal $684/week threshold or provide similar thresholds.
FederalOvertime Threshold for Salaried Employees
Employees earning less than $684/week are eligible for overtime under FLSA.
StateRevenue Threshold for Employers
Ohio: Only applies to employers with at least $150,000 in annual gross sales.
Most states follow federal overtime law provision for this matter.
FederalRevenue Threshold for Employers
Applies to employers with annual gross sales of $500,000 or more or engaged in interstate commerce.
StateExempt Employees
Colorado: Requires salaried employees earning above the minimum wage for all hours worked.
California: Exemptions depend on meeting salary thresholds (2x the state minimum wage) and job duties.
Alaska: Exemptions require at least 2x the state minimum wage.
FederalExempt Employees
Exemptions for executive, administrative, and professional employees meeting job duties and salary tests.
StateIndustry-Specific Rules
Alaska: Industry-specific rules apply for mining (Alaska Stat. § 23.10.410) and trucking (Alaska Stat. § 23.10.060).
Minnesota: Certain industries (e.g., hospitals, nursing homes, schools) must comply with federal overtime rules.
Other states such as Kentucky exclude certain industries from state overtime laws.
FederalIndustry-Specific Rules
The FLSA exempts certain workers from overtime, including agricultural workers, commissioned retail employees, transportation workers (e.g., truck drivers, railroad, airline), live-in domestic workers, and seasonal/recreational workers at camps or amusement parks.
StateSpecific Overtime Provisions for Manual Laborers
Florida: Manual laborers must receive extra pay after working 10 hours/day unless a written agreement specifies otherwise.
FederalSpecific Overtime Provisions for Manual Laborers
Not specified.
StateMutual Agreements for Modified Workweeks
Nevada: Allows a 10-hour day/4-day workweek by mutual agreement without triggering daily overtime.
Other states generally require strict adherence to overtime rules unless specified by law.
FederalMutual Agreements for Modified Workweeks
Not allowed.

State Overtime Laws That Differ From Federal Rules
While the Fair Labor Standards Act (FLSA) sets the baseline for overtime regulations across the United States, many states have implemented their own overtime laws that either expand upon or deviate significantly from these federal standards.
Let’s explore the states with the most distinct overtime rules, offering insight into how these laws differ from federal guidelines.
- Daily Overtime: California overtime law requires overtime pay (1.5x) for hours worked over 8 per day or 40 per week, and double time for hours exceeding 12 per day or 8 on the seventh consecutive day in a workweek.
- Salary Threshold: Exemptions for executive, administrative, and professional employees require a salary of at least twice the state minimum wage.
- Daily Overtime: Under Nevada overtime law, employees earning less than 1.5x the minimum wage must be paid overtime for hours over 8 per day, in addition to the 40-hour weekly standard.
- Mutual Workweek Agreement: Allows a 10-hour day/4-day workweek schedule without triggering daily overtime if agreed upon by the employer and employee.
- Consecutive Hours: According to Colorado overtime law, overtime applies after 12 consecutive hours worked, even if those hours do not exceed 40 in a week.
- Flexible Weekly Overtime: Whichever calculation yields the most overtime pay (e.g., daily vs. weekly) must be applied.
- Daily Overtime: Under Alaska labor law, overtime applies after 8 hours per day or 40 hours per week.
- Salary Threshold: Exemptions for executive, administrative, and professional employees require a salary of at least twice the state minimum wage.
- Industry-Specific Rules: Mining and trucking industries have additional unique overtime provisions.
- Weekly Overtime Threshold: Overtime under Minnesota labor law applies after 48 hours per week, rather than the federal 40-hour threshold.
- Key Distinction: A higher weekly threshold applies to most employers, reducing the frequency of overtime requirements compared to FLSA.
- Weekly Overtime Threshold: Under Kansas labor law, overtime applies after 46 hours per week.
- Key Distinction: Less strict weekly overtime threshold than federal law.
- Salary Threshold: According to Maine labor law, exemptions require annual earnings of at least 3,000 times the state hourly minimum wage, a stricter criterion than the federal $684/week threshold.
- Key Distinction: Ties salary exemption to state minimum wage, making it more dynamic than federal standards.
- Manual Laborers: Under Florida overtime law, employers cannot require more than 10 hours/day without additional pay unless a written agreement specifies otherwise.
- Key Distinction: Specific protections for manual laborers, absent in FLSA.

In cases where state laws differ from federal rules, employers must follow the law that provides the most favorable outcome for the employee (i.e., the law that provides higher overtime pay).
FLSA Overtime Law Misconceptions
Many people think that if an employee works more than 8 hours in a single day, they’re entitled to overtime pay.
Under the Fair Labor Standards Act (FLSA), overtime pay is based on hours worked over 40 in a workweek, not hours worked in a single day.
A workweek is defined as 7 consecutive 24-hour periods (168 hours total). Employers must calculate overtime weekly, regardless of daily work hours. States like California may have different daily overtime rules, but these are exceptions, not the federal standard.
Some employers believe they can average an employee’s hours over two or more weeks to avoid paying overtime for hours worked beyond 40 in a single week.
The FLSA requires that overtime be calculated on a weekly basis, not averaged over multiple weeks.
For example, if an employee works 30 hours one week and 50 hours the next, the employer cannot average these to 40 hours per week. Instead, the employee must be paid for 10 overtime hours in the second week.
Overtime wages must be included in the paycheck for the period in which the overtime was worked.
Many people believe that if someone is paid a salary instead of an hourly wage, they’re automatically exempt from overtime pay.
Exempt status is not based solely on whether an employee is salaried. Under the FLSA, exemption depends on three factors:
- The employee must be paid on a salary basis.
- Their salary must meet the threshold of $684 per week ($35,568 per year).
- Their job duties must fall into specific categories, such as executive, administrative, or professional roles.
If a salaried employee fails to meet any of these criteria, they are entitled to overtime pay.
Many believe overtime pay is simply 1.5 times the employee’s straight hourly rate.
Overtime under the FLSA is calculated using the regular rate of pay, which includes hourly wages, commissions, and non-discretionary bonuses.
The regular rate is determined by dividing total weekly earnings (excluding specific exemptions like gifts or vacation pay) by total hours worked, ensuring overtime is accurately paid at 1.5 times this rate. Miscalculations or flat-rate methods can lead to legal penalties and back pay obligations.
Employers sometimes assume that a fixed weekly salary compensates employees for all hours worked, even if they exceed 40 hours in a workweek.
A fixed salary does not exempt employers from paying overtime. For instance, an employee earning $405 for a 45-hour week has a regular rate of $9/hour ($405 ÷ 45 hours). The employer must pay an additional 1.5 times the regular rate for the 5 overtime hours, equaling $4.50/hour in extra compensation for those hours.
Some employers offer a flat rate for overtime hours, assuming it satisfies FLSA requirements as long as the total pay is sufficient.
Flat-rate payments, such as $180 for all overtime worked, do not meet FLSA requirements. Overtime pay must be calculated as 1.5 times the employee’s regular hourly rate for every hour worked beyond 40 in a week.
Even if the flat rate exceeds the required overtime pay, the calculation must still be done correctly.
Some employees and employers believe they can agree to waive overtime pay through contracts or verbal agreements.
Overtime pay rights cannot be waived, even if both parties agree.
Employees cannot sign away their right to overtime pay under the FLSA. Similarly, policies stating that overtime must be pre-approved do not excuse employers from paying for overtime hours worked, even if unauthorized.
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Penalties for Overtime Law Noncompliance
2x Unpaid OvertimeFAILURE TO PAY OVERTIME
Under federal law, employers who fail to pay overtime may be liable for both unpaid wages and an additional equal amount in liquidated damages (29 C.F.R. § 790.22(a)), effectively doubling the owed compensation. This applies unless the employer can demonstrate that the violation was made in good faith and based on reasonable grounds.
Legal Fees RecoveryADDITIONAL COMPENSATORY DAMAGES
Employees who win an unpaid overtime case can recover their attorneys’ fees, sometimes exceeding the amount of back wages owed (29 U.S.C. § 216(b)). Employers may also face collective actions, where multiple employees join a lawsuit, greatly increasing the financial risk.
$1,100/violationREPEATED OR WILLFUL OVERTIME VIOLATIONS
Employers who repeatedly or willfully violate the FLSA’s overtime provisions may face civil penalties of up to $1,100 per violation (29 U.S.C. § 216(e)). This penalty applies in addition to the payment of unpaid wages and liquidated damages.
Example Cases of Federal Overtime Law Non-Compliance
1. Tampa Construction Company Pays $38,544 for Overtime Violations
Environmental Construction Inc. (ECI), based in Tampa, Florida, paid $38,544 in back wages and damages to 16 employees after a U.S. Department of Labor (DOL) investigation.
The company violated the Fair Labor Standards Act (FLSA) by failing to pay workers for pre-shift activities like loading tools and traveling to worksites, which, when combined with onsite hours, exceeded 40 hours per week without overtime pay.
Moreover, a clerical worker was misclassified as managerial and paid a flat salary, leading to further unpaid overtime violations. The company also failed to maintain accurate time records, violating FLSA recordkeeping requirements.
Lesson Learned: Employers must account for all hours worked, including pre-shift duties and travel time, and accurately classify employees to avoid costly penalties. Misrecording or ignoring such time can result in significant back wages and damages.
2. Bakersfield Construction Company Pays $170K for Overtime Violations
Universal Welding and Construction Inc. in Bakersfield, California, failed to pay 74 employees overtime wages for hours worked beyond 40 in a workweek, violating the Fair Labor Standards Act (FLSA).
The U.S. Department of Labor (DOL) recovered $85,004 in unpaid wages, an additional $85,004 in liquidated damages, and $34,954 in civil money penalties.
Lesson Learned: Failing to pay overtime as required by the FLSA can result in significant financial penalties, including back wages, damages, and fines. Employers should proactively ensure compliance to avoid costly investigations.
3. Oil & Gas Company Sued for Misclassifying Day Rate Workers
A geologist filed a collective action under the FLSA against SM Energy Company, claiming day rate workers were misclassified as independent contractors and denied overtime pay.
The workers reportedly worked 12-hour shifts, 7 days a week, without overtime, despite being treated as employees in practice—controlled schedules, company policies, and integral roles in the business.
Lesson Learned: Misclassification of workers as independent contractors, especially those performing employee-like duties, can lead to significant legal and financial consequences. Employers must evaluate worker classifications and compensation practices carefully.
4. Baked Goods Company Settles $55 Million Misclassification Lawsuit
Flowers Foods Inc., the second-largest commercial bakery in the U.S., agreed to a $55 million settlement with delivery drivers who claimed they were misclassified as independent contractors under the FLSA and California law.
The settlement also includes a $50 million expenditure to repurchase 350 distribution territories in California and replace contractors with employees. Flowers Foods did not admit liability, and the settlement resolves related cases under California’s stricter worker classification laws.
Lesson Learned: Misclassification can result in massive settlements, especially in states with stringent worker protection laws. Businesses must carefully assess independent contractor relationships to avoid costly litigation and compliance issues.
5. Cleaning Franchisor Agrees to $30 Million Misclassification Settlement
Jan-Pro Franchising International, a nationwide commercial cleaning franchisor, reached a $30 million settlement with over 2,200 cleaning franchisees.
The plaintiffs alleged that Jan-Pro misclassified them as independent contractors instead of employees, violating California laws on minimum wage, overtime, expense reimbursement, and unlawful deductions. The settlement partially addressed claims related to required training, uniforms, cleaning supplies, and fees for management and marketing.
Lesson Learned: Misclassification of franchisees can lead to significant financial liability, especially under state laws like California’s. Employers should evaluate franchise agreements to ensure compliance with both federal and state labor standards.
Common Pitfalls and How to Avoid Them
1. Misclassifying Employees
- Mistake: Incorrectly labeling employees as exempt to avoid paying overtime.
- Solution: Regularly review classifications based on FLSA criteria for salary, payment type, and duties.
2. Failing to Include Bonuses in Regular Rate
- Mistake: Ignoring non-discretionary bonuses and commissions when calculating the regular hourly rate.
- Solution: Add all eligible earnings (except exclusions) to determine the regular rate.
2. Improper Recordkeeping
- Mistake: Failing to accurately track hours worked, especially for remote or flexible employees.
- Solution: Use reliable time-tracking tools to ensure accurate records of regular and overtime hours.
3. Averaging Hours Across Weeks
- Mistake: Splitting hours over multiple weeks instead of calculating overtime weekly.
- Solution: Always calculate overtime based on a single 40-hour workweek.
4. Misinterpreting State Laws
- Mistake: Not following stricter state overtime laws, such as daily overtime in California.
- Solution: Apply the law that provides the highest benefit to employees.
Steps to Stay Compliant With Federal Overtime Law
Staying compliant with federal overtime law might feel overwhelming, but with the right approach, it’s manageable. Here’s how to ensure your business stays on the right side of the Fair Labor Standards Act (FLSA) while maintaining a positive work environment.
1. Review Employee Classifications
Misclassifying employees is one of the most common overtime law violations. To avoid trouble:
- Regularly audit your workforce to confirm whether employees are exempt or non-exempt.
- Review job duties, salary levels, and payment types against FLSA criteria.
- Remember: Titles don’t determine exemption—actual job responsibilities do.

Keep detailed documentation of job classifications and the reasoning behind them. This will be helpful if your classifications are ever questioned.
2. Track Hours Accurately
Accurate time tracking is critical for calculating overtime pay.
- Use reliable time-tracking tools or software to monitor employee hours.
- For remote workers or employees with flexible schedules, ensure you’re capturing all hours worked.
- Make sure non-exempt employees know they must report all hours worked, even if unauthorized.

Consider geofencing-enabled software for tracking work hours at specific job sites to minimize discrepancies.
3. Adjust Compensation Plans
If employees are reclassified from exempt to non-exempt or if overtime pay becomes an issue:
- Ensure hourly and salaried non-exempt employees are paid correctly for all overtime hours worked.
- Consider how commissions, bonuses, or other forms of pay impact the regular rate of pay for overtime calculations.

For reclassified employees, factor in estimated overtime hours when determining their hourly rate to avoid budget surprises.
4. Update Policies and Train Staff
Clear policies and training can help prevent overtime-related mistakes.
a. Develop policies on:
- Timekeeping and clocking in/out.
- Overtime approval processes.
- Meal and rest breaks.
- Using company devices for work outside of regular hours.
b. Train both managers and employees to understand their responsibilities under overtime laws.

Keep training sessions simple and practical, focusing on day-to-day scenarios employees might encounter.
5. Consult Experts
Labor laws can get tricky, and staying compliant often requires expert advice.
- Work with an HR consultant, legal professional, or labor law specialist to review your practices.
- Stay updated on state-specific overtime laws, as some states have stricter rules than federal standards.

Periodically schedule compliance audits with an HR or legal expert to identify and fix potential issues before they escalate.
Stay Compliant With Federal Overtime Law With Workyard
Following the Fair Labor Standards Act (FLSA) protects everyone involved. For employers, it prevents costly lawsuits, fines, and reputational damage. For employees, it guarantees fair pay for their time and effort. Staying compliant is a win-win for all.
So, what’s next? Take action today:
- Review Your Practices: Double-check your employee classifications, time tracking, and overtime policies to ensure they meet FLSA standards.
- Leverage Tools Like Workyard: Simplify compliance and streamline payroll processes with accurate time tracking and built-in labor law rules.
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The federal salary threshold is $684 per week (or $35,568 per year). Employees must meet this threshold, along with specific job duties, to be classified as exempt from overtime pay under the Fair Labor Standards Act (FLSA).
Misclassifying an employee as exempt can lead to serious consequences. Employers may be required to pay back wages, liquidated damages, and legal fees. The Department of Labor may also impose fines for willful violations. Regular audits of employee classifications can help prevent costly mistakes.
Yes, non-discretionary bonuses (those tied to performance or other criteria outlined in advance) must be included in calculating an employee’s regular rate of pay. This regular rate is then used to determine the overtime pay rate. Discretionary bonuses, like holiday gifts, are generally excluded.
Yes, small businesses must comply with federal overtime law if they meet FLSA coverage criteria. This includes:
- Enterprise coverage: Businesses with annual revenue of $500,000 or more.
- Individual coverage: Employees engaged in interstate commerce, such as processing out-of-state transactions or handling goods that move across state lines.
Even smaller businesses not covered under FLSA may still need to follow state-specific overtime laws.
Yes, employees can refuse to work overtime, but there’s a catch. In at-will employment states, employers can legally terminate an employee for refusing overtime work unless exceptions apply, such as medical restrictions or religious accommodations.
States like California have specific protections, such as the one-day rest rule, which prohibits employers from requiring employees to work more than six consecutive days in a workweek.
Under federal law, overtime is calculated based on 40 hours per workweek, not the number of hours worked in a single day.
Employees are eligible for 1.5x their regular rate of pay for any hours worked over 40 in a seven-day workweek. However, some states, like California, require overtime pay for hours worked over 8 in a day. Check state-specific laws to ensure compliance.
In California, overtime pay kicks in for both:
- Daily overtime: Any hours worked over 8 in a single day.
- Weekly overtime: Any hours worked over 40 in a workweek.
Additionally, double-time pay applies for hours worked over 12 in a day or 8 hours on the 7th consecutive day in a workweek. California’s rules are stricter than federal overtime laws.
Employees are exempt from overtime pay if they meet the following three criteria under the Fair Labor Standards Act (FLSA):
- They are paid on a salary basis (not hourly).
- They earn at least $684 per week ($35,568 per year).
- Their job duties qualify under specific exemptions, such as executive, administrative, or professional roles.
Other exemptions include outside sales employees, certain computer professionals, and highly compensated employees (HCEs) earning at least $107,432 annually.
Yes, it is illegal under the FLSA to not pay time and a half for overtime hours worked by non-exempt employees.
Employers who fail to pay the proper overtime rate can face penalties, including back wages, fines, and legal action. Even if an employer prohibits overtime, they are still required to pay for unauthorized overtime hours worked by the employee.
To avoid non-compliance, employers should track hours accurately and address unauthorized overtime through disciplinary policies, not by withholding pay.