Salary and Overtime Pay

Even if you are paid salary, you may be entitled to overtime. This is because you can be paid salary and be either exempt OR nonexempt from overtime. This is a common mistake that employers make, intentional or not.

The fact that you get paid a salary should not deter you from seeking your rightful overtime pay, even if you don’t track all of your hours. Your job duties (and sometimes the industry you’re in) determine if you are entitled to overtime, not how you are paid. There are many exemptions from overtime, including the executive, administrative and professional exemptions, and many rules that go along with defining these exemptions. However, it is fairly common for employees to be misclassified as exempt (and here is a previous blog post on that topic). After all, this can save an employer a lot of money. So, it’s worth looking investigating.

Calculating your regular rate of pay when you are on salary is not always straightforward, but it can be done if there some time records or if the fact of overtime work can be established and some fair estimate made. Once the weekly work hours are known or estimated, the method for calculating an employee’s all-important regular rate of pay can vary.

When you work hours that fluctuate in a given week–which is common–yet get paid a fixed salary, the question arises as to whether one should divide the salary by 40 or the actual hours worked to arrive at the regular rate of pay. When you use the actual hours, the regular rate will be lower for overtime purposes, so employers like to use this method. This is called the “fluctuating work week”. The authority for fluctuating work week comes from a Supreme Court decision and, controversially, a regulation that many argue should not be used by employers to remedy a misclassification. Recent circuit court opinions from the 4th and 7th Circuits support the use of this employer-friendly calculation method. The bottom line is that the fluctuating work week method can be used in some circumstances and arrives at the regular rate by dividing weekly salary by the actual hours worked in that week rather than by 40, and then it calculates the overtime owed as 50 percent of the regular rate for all overtime hours worked in that week.

But don’t forget the big picture, even if the fluctuating work week is used, you are still entitled to overtime over and above your salary for your overtime hours if you are a nonexempt employee.

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