FLSA Overtime Rules: The Complete Guide for Employers and Employees

What the FLSA overtime rule actually says

The Fair Labor Standards Act requires covered, non-exempt employees to be paid at least 1.5 times their regular rate of pay for all hours worked over 40 in a workweek. There's no federal limit on how many hours an adult can work — the FLSA doesn't cap hours, it just makes the extra ones more expensive.

A few things the federal overtime law does not require: overtime for weekends or holidays as such (only hours over 40 matter), daily overtime (that's a state-law issue in places like California, Alaska, Colorado, and Nevada), or double-time pay. If you've heard those rules, they come from state law or company policy, not the FLSA.

Who's covered by fair labor standards act overtime

Coverage is broad. Most businesses are covered as enterprises if they have at least $500,000 in annual sales or do business across state lines — and individual employees can be covered even when the business isn't, if their own work involves interstate commerce (handling goods that crossed state lines, processing credit cards, making out-of-state calls). In practice, almost every small business should assume its hourly staff are covered.

Being covered doesn't automatically mean overtime is owed — that depends on whether the employee is exempt or non-exempt, which we cover below. But the default under the FLSA is non-exempt: if you can't clearly prove an exemption applies, the employee gets overtime.

The workweek: a fixed 7-day cycle

Overtime is measured against the workweek — a fixed, regularly recurring period of 168 hours, or seven consecutive 24-hour periods. The employer picks when it starts (say, Sunday 12:00 a.m.), and it can differ by team or location. What it can't do is float. You can't shift the workweek around to dodge overtime that's already accruing.

This also means no averaging across weeks. An employee who works 50 hours one week and 30 the next is owed 10 hours of overtime for the first week, even though the two-week average is 40. Paying biweekly doesn't change this — overtime is computed week by week within the pay period.

The regular rate: more than the hourly wage

Overtime is 1.5 times the regular rate, and the regular rate includes more than base pay. Nondiscretionary bonuses (production, attendance, retention bonuses promised in advance), shift differentials, and most commissions all go in. Genuinely discretionary bonuses, gifts, and expense reimbursements stay out.

Worked example: an employee earns $18 an hour, works 46 hours, and gets a $92 nondiscretionary weekly bonus. Straight-time earnings: 46 × $18 + $92 = $920. Regular rate: $920 ÷ 46 = $20. The overtime premium owed is half the regular rate for each overtime hour: 6 × $10 = $60. Total pay: $980. Calculating the premium off the bare $18 wage instead would underpay the employee — and that's one of the most common FLSA violations.

Exemptions: who doesn't get overtime

The best-known exemptions are the white-collar ones: executive, administrative, and professional employees, plus certain computer employees and outside salespeople. To be exempt under most of these, an employee generally must be paid on a salary basis at or above the federal salary threshold and pass a duties test — actually performing exempt-level work, like managing two or more employees with hiring authority.

Two traps to avoid. First, paying a salary alone doesn't make anyone exempt; a salaried cashier is still owed overtime. Second, job titles don't matter — 'manager' on a badge means nothing if the person spends the day running a register. The salary threshold has been litigated and revised in recent years, so check the Department of Labor's current figure before classifying anyone as exempt.

Recordkeeping and what violations cost

The FLSA requires employers to keep accurate records of hours worked and wages paid for non-exempt employees — including time of day and day of week the workweek begins, daily and weekly hours, the regular rate, and overtime earnings. There's no required format, but if records are missing or wrong, courts tend to credit the employee's own estimate of hours. Sloppy timekeeping is effectively a confession.

Violations are expensive. Employers can owe back wages plus an equal amount in liquidated damages — doubling the bill — and claims typically reach back two years, or three for willful violations. Multiply that across a crew of hourly workers and a small payroll error becomes a five- or six-figure problem. An accurate time clock with automatic overtime totals, like Kloqk's free time clock, is the cheapest insurance there is.

Frequently asked questions

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