How to Handle Overtime-Related Disputes

Overtime-related disputes are among the most common wage and hour lawsuits filed by employees. Disputes may be resolved through mediation or negotiations, or through legal action in court.

Overtime pay disputes may arise from a variety of circumstances, such as:

Exemptions

The federal courts that oversee cases arising in California have recently been busy grappling with how to interpret the law on overtime-related disputes. A recent decision from one of these courts offers some guidance, but does not necessarily provide a reprieve from state law for employers that are struggling to balance the requirements of federal and California wage and hour laws.

Disputes over exemptions often involve difficult fact-intensive inquiries into an employee’s day-to-day duties and job responsibilities, rather than simply looking at their job title or how they are paid (i.e., salary vs. hourly). As a result, these disputes can quickly get complicated and expensive for both employees and employers.

Some employers may misclassify employees as exempt in order to avoid paying them overtime. In such situations, the employer is generally liable for back wages up to three years. Employers may also be liable for the costs of litigation if they are found to have willfully violated federal wage and hour laws.

Calculation of Hours

Overtime laws require that employees who clock in more than a certain number of hours in a week be compensated at a higher rate than their standard pay. In most countries, the threshold is 40 work hours a week. However, specific types of jobs are exempt from overtime compensation requirements and are known as exempt positions.

Over 70 million people work hourly, so calculating overtime is a necessary skill for many workers and employers. Knowing when to calculate overtime, how to calculate the figure and what to look out for can help you avoid common mistakes.

To calculate overtime, start by recording the time at which a worker begins and ends their shift. Ensure this information is provided on a time card or other record and double-check it against state labor laws. Next, add up the total number of working hours in a designated period (e.g., a workweek) and compare this total with the overtime threshold. Overtime is generally paid at a rate of 1.5 times an employee’s normal hourly pay, which is also called time and a half.

Payment

While federal and state law requires employers to pay employees time-and-a-half for overtime hours worked, lawsuits alleging that employers failed to pay employees for overtime remain one of the most common types of workplace claims. In addition to the issue of misclassification, disputes often arise when employers improperly calculate an employee’s regular rate of pay, fail to record overtime hours or otherwise deny employees their legally entitled payments.

To help prevent these overtime-related disputes, it is important for employers to have clear policies and procedures in place regarding the recording of employee time. Additionally, employers should clearly communicate to employees whether they are paid a salary or hourly wage and if they are eligible for overtime, as well as the terms of any applicable compensation agreements. This will avoid confusion and reduce the risk of legal action.

Misclassification of Employees

Whether it is done deliberately or in error, misclassification hurts workers and the local and national economy. Workers lose out on benefits that they would otherwise be entitled to, while governments lose a substantial amount of tax revenue that they need to support essential services.

While misclassifying employees as contractors can offer short-term savings, it can also expose companies to huge fines and penalties for breaching labour laws and ethical standards. As a result, it is important for businesses to prioritise compliance with classification discourse in the countries where they operate.

Employees who are misclassified as contractors lose out on a range of workplace protections such as the right to join a union and the right to overtime pay. They also suffer from reduced tax benefits and are unable to access unemployment insurance or worker’s compensation. In addition, they are not eligible for the same job-related benefits such as pension contributions and holiday pay. Workers can report misclassification of their colleagues to their governing body and may be able to claim back-pay, penalties and interest for the period in which they were wrongly classified.