Get Savvy about the Rules of Overtime Pay

Hispanic Entrepreneurs Can Benefit from State and Federal Guidelines


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In good times and bad, employees at millions of small business nationwide are working overtime. But many small business owners may not be totally informed on the issue of overtime pay. The consequences of failing to pay overtime when required, or paying it improperly, can be severe.

According to the U.S. Department of Labor’s Wage and Hour Division (WHD), hourly employees must be paid overtime at time-and-a-half for working more than 40 hours in a workweek. Overtime pay may not be waived by any agreement between you and your workers.

And over the past several years, the federal government has been stepping up enforcement of wage and hour laws regarding overtime. Particular scrutiny falls on thousands of what the Department of Labor (DOL) considers “low-wage” businesses, such as day care centers, restaurants, janitorial services, health care facilities, motels and temp services.

Yet among small businesses, there remains a great deal of confusion about the rules of overtime pay. In general, federal wage and hour rules apply to any business with at least two employees and $500,000 in revenues. But there are exceptions as well as state guidelines that may also apply.

One potential pitfall involves salaries for workweeks more than 40 hours. According to DOL, a fixed salary for a regular workweek longer than 40 hours does not eliminate an employer’s obligation to pay overtime. Under Federal rules, however, employers can exempt certain positions from overtime regulations.

These “white collar” exemptions include executives and professionals who spend at least 80 percent of their time on duties involving their own independent discretion and not structured work. Federal law does not require extra pay for weekend or night work. Nor is there any provision for double-time pay. Both are matters of agreement between you and your employees.

As officials at Paxchex, a payroll firm, note, “Classifying your employees as either exempt or non-exempt is neither exact or easy.” The decision shouldn’t be based merely on job title or whether someone is hourly or salaried. Instead, use job duties as the main factor.

The U.S. Department of Labor’s Wage and Hour Division Web site,, has detailed information on federal requirements for overtime, minimum wages, family and medical leave and related topics critical to small business. Look for the “Overtime Pay” section and also the FAQ section that answers questions about when overtime is due, how many hours per day or week employees can work, and what’s considered full- or part-time employment. State requirements and contacts are also listed.

To learn more about small business employment issues, contact SCORE “Counselors to America’s Small Business.” SCORE is a nonprofit organization of more than 10,500 volunteer business counselors who provide free, confidential business counseling and training workshops to small business owners. Call 1-800/634-0245 for the SCORE chapter nearest you, or find a counselor online at


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