Overtime Laws Explained: What You Need to Know to Stay Compliant

Overtime is a simple concept in theory, but in practice, it can get quite complicated. This occurs due to the different laws governing the handling of overtime, rather than the calculation of overtime itself. There are federal overtime laws under the Fair Labor Standards Act (FLSA) and the Contract Work Hours and Safety Standards Act (CWHSSA). Every state has its own set of overtime laws, too. For instance, in some states, overtime kicks in after eight hours have been worked in a single day, while in others it is after twelve hours or after 40 hours have been worked in a workweek. Additionally, handling overtime and fringe benefits for prevailing wage projects poses an issue.

Federal Laws Impacting Overtime

As you can see, there is more to overtime than just calculating time and a half. Let’s take a closer look at overtime, the laws that govern it, and how it applies to government contracts under Davis-Bacon and Related Acts.

Fair Labor Standards Act (FLSA)

The Fair Labor Standards Act (FLSA) and the Contract Work Hours and Safety Standards Act (CWHSSA) are federal labor laws that directly impact the relationship between employer and employee. The FLSA and the CWHSSA have aspects that affect prevailing wage projects, influencing how they handle overtime and record-keeping.

Labor Standards

The Fair Labor Standards Act (FLSA) established a set of labor standards, including but not limited to restrictions on child labor, required record keeping, minimum wages, and overtime. The FLSA says this about overtime: “Unless exempt, employees covered by the Act must receive overtime pay for hours worked over 40 in a workweek at a rate not less than time and one-half their regular rates of pay. There is no limit in the Act on the number of hours employees aged 16 and older may work in any workweek.”

According to the FLSA, hours worked on Saturdays, Sundays, holidays, or regular days of rest do not require overtime pay unless they constitute actual overtime hours. The FLSA defines a workweek as a period of 168 hours during 7 consecutive 24-hour periods. It can begin on any day and at any hour, and each workweek stands alone to calculate overtime. You can’t average 2 or more workweeks to calculate pay or determine overtime.

Who does the FLSA apply to?

The FLSA applies to employers with annual sales totaling $500,000 and up, or those engaged in any type of interstate commerce. This doesn’t mean just moving goods across state lines but extends to receiving calls, communications or orders from other states.

The following are examples of employees exempt from both the minimum wage and overtime pay requirements:

• Executive, administrative, and professional employees (including teachers and academic administrative personnel in elementary and secondary schools), outside sales employees, and certain skilled computer professionals (as defined in the Department of Labor’s regulations)
• Employees of certain seasonal amusement or recreational establishments
• Employees of certain small newspapers, newspaper delivery, and switchboard operators of small telephone companies
• Seamen employed on foreign vessels and those engaged in fishing operations
• Farm workers employed on some small farms
• Casual babysitters
• Persons employed solely by the individual receiving services (not an agency, non-profit, or other third-party employer) primarily providing fellowship and protection (companionship services) to seniors and/or individuals with injuries, illnesses, or disabilities

Keep in mind that your state laws might extend overtime to groups not covered by FLSA, or they may specify how to calculate overtime or determine what constitutes a workday and workweek. Always check with your state to make sure you understand your obligations and responsibilities.

You can read more about the FLSA by following this link.

Contract Work Hours and Safety Standards Act (CWHSSA)

The Contract Work Hours and Safety Standards Act (CWHSSA) is a federal labor law that establishes standards for contractors and subcontractors working on eligible federal contracts. This applies to laborers, mechanics, guards and watchmen on federal service contracts or construction contracts over $150,000.

CWHSSA also applies to some federally assisted construction contracts if they are worth over $100,000 and subject to Davis-Bacon and Related Acts.  

Exceptions to the Contract Work Hours and Safety Standards Act (CWHSSA)

There are some exceptions to CWHSSA, such as contracts for the following:

• Transportation by land, air, or water
• The transmission of intelligence
• The purchase of supplies, materials, or articles ordinarily available
• Employees must perform work following the provisions of the Walsh-Healey Public Contracts Act
• Special contracts as exempted by the Secretary of Labor when they serve the public interest, prevent injustice, undue hardship or prevent the impairment of government business.

Specific Law Mandates for CWHSSA

CWHSSA creates pay minimums, overtime, and recording keeping standards that must be followed. The law mandates that individuals covered by it must receive one and one-half times their basic rate of pay for all hours worked over 40 in a workweek. Under the CWHSSA, contractors and subcontractors that intentionally violate the law may be fined, imprisoned or both.

While this is a far-reaching law, it’s possible that your state has additional labor laws and rules about overtime. Always check with your state to make sure you understand your obligations and responsibilities.

You can read more about the CWHSSA by following this link.

Navigating State Overtime Laws

State laws introduce a new level of complication when dealing with overtime, especially for companies that operate in multiple states and those that work on state or federal public works projects. States actively govern overtime hours. They determine its calculation and specify who qualifies through their own set of labor laws and definitions. This occurs because states have unique regulations in place.

Colorado Overtime Laws

In Colorado, for example, employers must pay 1.5 times the regular rate of pay for overtime hours. Consider hours worked over and above as overtime:

• 40 hours per workweek
• 12 hours in a workday
• 12 consecutive hours, regardless of the start and end time

In Colorado, a workweek is any consecutive period of 168 hours, no matter which day that starts on as long as it is the same each week. So a week could start on Wednesday, which is when the overtime clock would start each week.

California Overtime Laws

In California, overtime is 1.5 times the regular rate of pay for anything over 8 hours but under 12 hours in a single day. Everything over 12 is double time.

The definition of a workweek is a fixed and regularly recurring period of 168 hours or seven consecutive 24-hour periods. It can start on any day, and different workers can have different established workweeks, but it can’t change unless the change is permanent. The intention behind this language is to prevent companies from evading overtime by regularly changing workweeks.

It’s important to understand the labor laws in every state you work in to avoid costly mistakes. If your company doesn’t pay overtime correctly or violates other labor laws, it could result in an investigation, fines and legal penalties. You can locate your state’s Department of Labor here.

Overtime and Federal Prevailing Wages

The Davis-Bacon and Related Acts don’t mandate overtime, but that doesn’t exclude workers on prevailing wage projects. Other federal laws, namely FLSA and CWHSSA, cover overtime on federal prevailing wage contracts, requiring workers to receive time and one-half the basic rate of pay for hours worked beyond 40 hours in a workweek.

Important Notes About Overtime and Prevailing Wages

• Calculate overtime as time and one-half the basic rate of pay for hours worked in excess of 40 hours in a workweek.
• The basic rate of pay is the straight-time hourly rate as listed on the wage determination for each work classification. This amount cannot be less than the basic hourly rate required by the wage determination.
• Exclude fringe benefits from the overtime calculation; thus, calculate overtime solely on the straight-time rates.
• Do not include non-work hours, such as paid leave or required holidays, in the overtime pay calculation.
• If a worker engages in tasks under multiple work classifications with varying pay rates, determine overtime based on the weekly average. This involves dividing the total straight-time pay for work at each applicable rate by the total number of hours worked across all jobs during the workweek. Alternatively, if an employee will work under two or more classifications with different straight-time hourly rates, the worker and employer can agree that overtime is based on the hourly rate of the work they are doing when overtime hours are clocked. This must be agreed to before the work is performed.
• If a prime contract is $100,000 or less, CWHSS does not apply. In these situations, overtime requirements come from other laws, including FLSA. It is always your responsibility to know which laws cover your government contract.
• A workweek is a fixed and regularly recurring period of 168 hours occurring within seven consecutive 24-hour periods. It can start on any day but must be fixed and reoccurring.
• A workday is a consecutive 24-hour period beginning at the same time each calendar day, but it may begin at any time of day.

Overtime and Prevailing Wage Examples

If a wage determination specifies an electrician’s hourly rate as $22 and their fringe rate as $5 per hour, then their total prevailing rate per hour for all straight-time hours worked under that work classification is $27. Calculate overtime for any hour exceeding 40 within the workweek, and do not incorporate the fringe hourly rate in this calculation.

Let’s look at how that would work out for 44 hours in a workweek:

44 hours x $22 = $ 968 regular wages
44 hours x 5 = $220 fringe benefits
4 hours x (1/2 x $22)  = $44 overtime under CWHSSA
Total pay $1232 for the workweek

This is the required hourly and fringe rate on non-overtime and the required time and one-half on overtime hours.

Managing Overtime in Multiple Work Classifications

There are two ways to deal with overtime if different work classifications are worked during the course of a workweek. Let’s look at how this might look if a worker performs work as a painter and electrician at the following rates:

Electrician = $12 prevailing hourly rate and $2.50 in fringe benefits
Painter = $10 prevailing hourly rate and $3 in fringe benefits

During the course of a work week the worker logged the following hours:

Work Type	M	T	W	Th	Fri	Sat	Sun
Work as electrician	10					8
Work as painter			10	10	10

Method 1 using weekly average as a basis

Start by calculating the straight-time wages, which excludes all fringes.

18 hours as electrician x $12 = $216
30 hours as painter x $10  = $300
Total = $516

Next, calculate the regular rate, which is the total from above divided by the hours worked that week.
$516 divided by 48 hours worked = $10.75 per hour is the regular rate

Finally, calculate the overtime premium due, which is ½ x the regular rate:  ½ ($10.75) x 8 hours of overtime = $43
This makes the final pay for the workweek $559

Method 2 using rate in effect during overtime

A total of 8 hours were logged for Saturday under the electrician work classification with a base hourly pay of $12 per hour. Since this is the work classification the overtime was in effect for, this is the rate of overtime calculations. Fringes are not included in this calculation.

½ ($12)) x 8 = $48

Using this method, the total overtime premium for this workweek would be $48. To use this type of overtime calculation method, hours and work classifications must be carefully tracked. This is hard to do if you’re using manual time-tracking methods, like time cards and spreadsheets. Also, the employer and worker have to agree ahead of time to use this type of calculation for overtime.

Understanding the Law Saves You Money and Time

As if the situation wasn’t complicated enough, there are instances where additional wages and overtime pay may apply concurrently. For this reason, it is wise to consult with your state or local government agency to fully understand how to comply with the non-federal overtime requirements. Failing to comprehend the law is never deemed a valid excuse if an inspection results in citations for violating labor laws. This makes spending the time upfront to understand and train your payroll team worthwhile.

Official sources for information on overtime, prevailing wages and federal labor laws:
Wages and the Fair Labor Standards Act (FLSA)
FLSA and Overtime
Contract Work Hours and Safety Standards Act (CWHSSA)
CWHSSA and Feder Contracts

Basic Overtime and Prevailing Wage Q & A –

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The material presented here is educational in nature and is not intended to be, nor should be relied upon, as legal or financial advice. Please consult with an attorney or financial professional for advice.