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How to determine overtime pay for salaried employees

by | Jun 1, 2021 | Employment Law

Under the Fair Labor and Standards Act (FLSA), employees that work over 40 hours per week are entitled to premium pay for all hours worked in excess of 40 in any given week. This is not only true with workers working a fixed hourly rate, but for non-exempt salaried employees as well. Learn more about overtime pay as it relates to exempt or non-exempt salaried employees

Non-exempt salaried employees are entitled to overtime pay.

Exempt Salaried Employees

Typically, exempt individuals are those that are administrative, executive, professional, or outside sales personnel. Within their roles, these white-collar employees are paid on a salary basis and receive a minimum salary for the work they perform. Their salary cannot be reduced due to quality and quantity of work. They must receive their full salary for any week they perform any work, regardless of the number of days or hours as long as its above zero. Exempt employees do not need to be paid overtime or premium pay by their employer.

Non-Exempt Salaried Employees

If a salaried employee is not exempt, the employer must pay a premium for any hours worked beyond the typical 40-hour workweek. To determine the overtime premium that an employer must pay their salaried employee, the employer must first determine that employee’s “real” wage. To determine the “real” wage, the employer must take the weekly salary and divide that by the number of hours actually worked for that week. Overtime pay is then calculated by taking that “real” wage and multiplying it by 0.5 and adding it to the base wage. The premium rate is then multiplied by the total number of hours worked in excess of 40 for each given week.

Calculating Overtime Pay for Salaried Employees

For example, take an employee who is paid on a $900/week basis. They worked 50 hours this week. Their “real” wage would then be $18 per hour ($900/50 hours). Because they worked over 40 hours, they are entitled to premium pay for the 10 additional hours. To compute this rate, take the “real” wage for the week, which was $18 per hour, multiply that by 0.5 (which would equal $9 per hour) and add it to the base rate of $18 for a total of $27/hour. This is the employee’s overtime (i.e. “premium”) rate of pay. In this example, the employee would receive $720 for the first 40 hours ($18 x 40) and $270 for the 10 overtime hours ($27 x 10) for a total weekly paycheck of $990.

Many employers find themselves in violation of the FLSA and state wage laws because they either misclassify the salaried employee as “exempt,” or do not understand the correct method for calculating overtime pay. Under either scenario, the employee may file suit for a violation of the FLSA and state wage laws and be entitled to lost overtime wages, exemplary damages, and attorney’s fees and costs.

Damages due to overtime violations

To determine if there should be liquidated damages awarded to the plaintiffs of overtime violation claims, the courts must first look at whether the violation happened in good faith. Although it doesn’t affect the fact that they violated FLSA, it does play a factor in the number of liquidated damages they are subject to paying. Some employers will wrongly compute overtime pay, but if this not intentional and they thought they were complying with the FLSA, the mistake was made in good faith.

The statute of limitations for an FLSA claim is 2 years. However, willful violations of the FSLA have a 3-year statute of limitation. Employees must be able to prove the willfulness of the employer to have the 3-year statute of limitations apply rather than the 2-year statute of limitations. This means that the plaintiff must show that the employer must have known or showed reckless disregard for the conduct surrounding this statute. Under Wisconsin law, the plaintiff may be entitled to recover up to 50% liquidated damages on all wages that were owed to them at the time of the lawsuit being filed. A defendant may be held personally liable for this violation in certain circumstances.

Employment lawyers can help you with your wage violation claim

It is important for businesses to be aware of wage statutes, like the Fair Labor and Standards Act. Employees also need to be aware of their rights. To better understand whether you are getting paid in a way that abides by the FLSA, talk to an experienced employment lawyer. They can help review your case and provide the best action to take going forward. The attorneys at McDonald & Kloth, LLC can help you with your wage or overtime violation claim. Contact us today at 262-252-9122.