to compensation for certain employees for hours worked over forty hours in a work week at one and a half times the employee’s regular rate of pay. Most people understand the general concept of overtime pay; but employees do not always understand some of the specific rules. Employers often take advantage of this by not paying overtime pay owed to employees. This is a major issue in employment law and one that often requires Texas overtime lawyers to correct when an employee does not receive overtime he or she is due.
Who receives overtime pay in Texas
Under the Fair Labor Standards Act (FLSA) and the Texas Payday Law, all employees receive overtime pay unless a statutory exemption excludes them. The most common reason is the employee meets one of the broad exemptions for both minimum wage and overtime pay. These exemptions are for executive, administrative and professional employees, who receive a salary of at least $455 each week and meet the specific tests as an executive, administrative, or professional employee. An employee is not exempt merely because the employer says so. The Department of Labor specifies tests for each classification.
There are also exemptions for other classes of workers, such as certain IT professionals, outside sales representatives, babysitters, certain farmers and fishers. The Department of Labor created specific meanings and tests for these positions to qualify as exempt from overtime pay.
If an exemption does not apply then you must receive overtime pay for hours worked above forty hours. Even if your employer pays you on a salary basis you may still be salaried but non-exempt. That means you receive a salary but still overtime eligible. This employment lawyer video further explains some of the overtime law basics in Texas:
And this one:
When overtime pay is due in Texas
Overtime pay is due at one and a half times the employee’s regular rate of pay for each hour worked over forty hours in the work week. Calculating hours above forty hours is usually simple addition; the key calculation is determining the work week. Under the FLSA and Texas Payday Law, employers must calculate the work week as a fixed schedule of a continuous, seven day, 24 hours per day schedule. It does not have to be Sunday at 12:01am to Saturday at midnight. It can start on any day of the week and end seven consecutive days later, such as Wednesday through Tuesday.
Whatever week period the employer chooses must follow each week on a regular basis.
An employer can change the work week but the change must create a new routine. The employer cannot change the week to avoid paying overtime one or two weeks and then go back. Problems can arise when transferring to a new work week. Employees cannot lose overtime pay as a result. Employers can have different work weeks for different classes of employees but must fix the work week for each employee.
Employers must pay overtime for each hour of work time above forty hours in the work week. They cannot average hours across multiple weeks or carry time over forty hours to later weeks. The hours worked must be calculated within the work week the hours were worked (quite a tongue twister) and paid in the paycheck on the regular pay day for that work week.
Calculating overtime pay hours in Texas
Calculating the hours for overtime pay is essentially the same except the payrate changes over forty. Employees must receive pay for hours considered work under the FLSA and Texas Payday Law.
This includes hours spent performing work for the employer, paid breaks, waiting time where an employee must stay on the employer’s work premises waiting for work (such as a receptionist reading a book waiting for calls or visitors), certain on-call time, travel time while traveling in the course of performing work (but not traveling from home to work or work to home) and some other very specific circumstances applying to specific types of jobs.
A recognized exception exists to the forty hour work week for some first responders, including privately employed emergency medical technicians (EMTs) who work eighty hour work blocks over two weeks. This exception is very specific to those roles and apply very different rules.
How overtime pay is calculated in Texas
Overtime pay generally pays at as one and a half times the regular rate of pay for each hour worked. Most employees receive a set hourly rate for each hour worked. In this case, the regular rate of pay is obvious. Overtime pay is one and a half times that amount for each hour over forty hours.
Some employees work in jobs where they perform different duties at different rates of pay. (If that is not you, you might want to skip the somewhat confusing math to follow.) In that case, the regular rate of pay is the weighted average of rate of pay for each hour worked. For example, if the employee worked ten hours at $10/hr and forty hours at $20/hr then the employee’s regular rate of pay would be calculated based on the $10 for 10 hours and $20 for 20 hours added together and then averaged by dividing the sum by the total hours worked, here fifty hours.
10 hours x $10 = $100
40 hours x $20 = $800
$100 + $800 = $900
$900 / 50 (total hours worked) = $18 regular rate of pay
In this example, the employee’s regular rate of pay of $18 is only used to calculate the overtime pay for the ten hours worked over forty. Here the employee has already received pay for each of the fifty hours worked so he has received the “one” in the “one and a half times regular rate of pay” and still needs to be paid the “half”. The “half” is the added amount of overtime pay. The “half” is calculated at one half of the regular rate of pay for each hour over forty. Since the employee’s regular rate of pay is $18, the “half” is $9 per hour. At ten hours of overtime the employee is due an extra $90 in overtime pay, so the employee receives $990 for the week.
Don’t worry if that confused you. If you receive a fixed hourly rate for all hours worked you can forget you ever read that stuff. If you do receive multiple hourly rates and have confusion, don’t feel bad. When I took Employment Law in law school and we discussed this many of my classmates still did not understand calculate it correctly on the final exam.
Regular rate of pay for overtime in Texas
The dollar amounts that go into the regular rate of pay calculation, whether you receive one fixed hourly rate or not, can be more than just your normal hourly rate. Any additional wage premiums (or “wage augments” as the Department of Labor calls them) you receive without discretion are part of the regular rate of pay calculation. This includes shift differentials, longevity pay, premium pay for certain positions and other fixed amounts.
Additionally, if you receive commissions paid on a periodic basis those commissions must be calculated back into the work weeks for the weeks each commission was earned. If your employer pays commissions monthly or quarterly and you received overtime pay for any of the weeks covered by that commission payment, the employer must go back and calculate the commission back into the regular rate of pay plus pay you the additional overtime pay. This is a huge problem for many commissioned in-house sales representatives because many employers fail to perform this calculation.
Bonuses and regular rate of pay for overtime in Texas
Some bonuses are also included in the regular rate of pay calculation. If you are eligible to receive nondiscretionary bonuses, those bonuses are part of your regular rate of pay. Nondiscretionary bonuses are bonuses your employer pays out when you meet certain qualifications without management having discretion whether to pay the bonus or what amount to pay. Performance bonuses are usually discretionary because your supervisor has discretion whether your performance qualifies you for a bonus and if so, how much you should receive.
Nondiscretionary bonuses generally include incentive or performance bonuses when you automatically qualify for a fixed dollar amount or percentage of your pay upon meeting fixed goals. They also include attendance bonuses earned automatically if you appear for work within fixed requirements (such as perfect attendance) or bonuses for completing training programs.
If you receive nondiscretionary bonuses and worked over forty hours in any work week covered by the bonus then the employer must divide the bonus by the number of work weeks in the bonus period and then for each work week in which overtime occurred divide out that week’s bonus portion by the number of hours worked to determine the regular rate of pay for that week with the bonus included and pay the additional overtime pay.
For example, let’s say you normally work forty hours per week but had one week the last quarter where you worked fifty hours and on where you worked sixty hours. You also received a quarterly attendance bonus of $1000 and your normal hourly rate of pay is $20. Before the bonus is calculated you received:
$800 for each week you worked forty hours (40 x $20)
$1100 for the week you worked fifty hours (1.5 x $20 x 10 hours of overtime = $300, plus $800 regular pay)
$1400 for the week you worked sixty hours (1.5 x $20 x 20 hours of overtime = $600, plus $800 regular pay)
If the quarterly bonus is paid over thirteen weeks then $1000 divided by thirteen means the bonus is prorated at $76.92 per week. Since you worked two weeks of overtime, the employer needs to increase the overtime pay for both of those weeks. You have received the overtime pay for your hourly rate and only need the additional overtime pay for the bonus portion. You have also received the bonus amount, which is the “one” in the “one and a half times the regular rate of pay” so we really only need to calculate the “and a half” portion.
For the fifty hour week you will divide the $76.92 by the hours worked in the week (50) to get the hourly addition of the bonus to the regular rate of pay, which is $1.54 per hour. You received that pay in the bonus amount, so we need to add the “and a half” portion of overtime pay. Half of $1.54 equals $0.77 per hour added overtime amount. Multiply that by the number of hours worked over forty (10) and you have $7.70 of overtime pay.
For the sixty hour week we do the same calculation but instead of dividing $76.92 by fifty we calculate it by the number of hours worked this week (60) to find the regular rate of pay for this week. $76.92 divided by sixty gets us $1.28 per hour. Again we just want the “and a half” portion of that so we divide $1.28 in half and the additional overtime pay is $0.64 multiplied by the hours worked over forty (20) and you are entitled to an additional $12.80 of overtime pay.
You can see a little math here can get confusing, especially when employees work varied hours each week. Many employers do not make this calculation on nondiscretionary bonuses or when they do it, they do it incorrectly and deprive employees of overtime pay they have earned. You may not think the $20.50 is a big deal but it is two percent of the bonus you would leave on the table and could pay for half a tank of gas these days.
Overtime premiums and regular rate of pay
One sort of quirky rule is when an employer pays an overtime premium for working beyond the regular schedule. An employer may incentivize work on certain days or beyond the regular daily shift by offering additional pay. The Department of Labor specifically excludes this overtime premium from the regular rate of pay calculation.
The employer can actually use this premium as a credit against overtime pay when the employee exceeds forty hours. This rules only applies if the employee works under an employment contract, such as a union contract. If you are an at-will employee, your employer cannot invoke this rule to reduce your regular rate of pay.
Salaried but non-exempt and overtime pay
One major exception to the one and a half times overtime pay rule is when employees receive a salary, rather than hourly computation of pay, but are not exempt from overtime pay. In this case the employee receive a flat rate of pay per week regardless of the number of hours worked. Just because the employee receives a salary does not make her exempt from overtime pay. She still receives overtime pay for each hour worked over forty hours in each work week. The major difference is that the employee only receives half the regular rate of pay for each hour of overtime.
If your brain hurts right now, just remember you’re not alone. There are lots of payroll administrators and even employment lawyers who do not fully understand these rules.
Common ways employers avoid paying overtime pay you have earned in Texas
Probably the most common way employers wrongly avoid paying overtime pay is by misclassifying employees as salaried and exempt. Many employers operate under the idea that just because you receive a salary you do not receive overtime. This is incorrect. The employer has the burden to prove your position meets one of the exemption tests for overtime pay. It is not enough that you are a white collar employee with a salary. View this video for more discussion about salaried employees and overtime.
One common way employers impermissibly avoid paying overtime pay is miscalculating the regular rate of pay or the hours worked. Your employer may argue that certain bonuses or premium pay does not apply to overtime. That is not true just because they say so. The same goes for the hours you work. Just because your employer says you do not receive overtime pay does not make it true.
How employers try to avoid overtime in Texas
A common scheme to avoid overtime pay is to intentionally “forget” to include overtime hours on the right paycheck; and then promise to add the hours to the next paycheck. That might be an acceptable solution if the mistake is honest. If it happens frequently it is not an honest mistake.
Employers roll hours from one week with overtime to other weeks and try to get you to go along. The employer may say you can roll the overtime hours into weeks where you miss work due to illness. This is impermissible. You must receive overtime pay for the number of hours worked in that work week.
Employers often attempt to offer other benefits in exchange for foregoing overtime pay. The most common way is paid time off in future weeks instead of the overtime. This is impermissible because it violates the requirement that you receive pay for the hours worked in that week. (Public employees can receive comp time instead of overtime pay.)
Your employer may instead offer to pay you “off the books” with a cash payment outside of payroll. This is illegal for many reasons, even if the employer pays you the same after-tax amount you would receive.
Employer frequently wrongly avoid overtime pay through other schemes to avoid paying employees anything for work performed. Employees may have to work off the clock, such as during lunches or responding to calls and emails at home. This is still work performed for your employer. You must receive pay and overtime pay if the total hours worked exceeds forty.
If you work at a job where you must come in early to log into a computer or put on safety equipment at the start of your shift, this time is also time which the employer must pay you and calculated into the hours worked in the week for overtime pay calculations. The same is true if you must stay after your shift to shut down computers, remove safety equipment, etc. It is also compensable time.