Overtime is a simple concept in theory, but in practice it can get quite complicated. This isn’t due to how overtime is calculated, but comes from the various laws that govern how it is handled. There are federal overtime laws under the Fair Labor Standards Act (FLSA) and the Contract Work Hours and Safety Standards Act (CWHSSA), and every state has their 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. Last but not least, there is the issue of how overtime and fringe benefits are handled for prevailing wage projects.
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 the govern it and how it applies to government contracts under Davis-Bacon and Related Acts.
Overtime federal laws
The Fair Labor Standards Act (FLSA) and the Contract Work Hours and Safety Standards Act (CWHSSA) are federal labor laws the directly impact the relationship between employer and employee. There are aspects of the FLSA and the CWHSSA that also impact prevailing wage projects, including how overtime and recording keeping is handled.
Fair Labor Standards Act (FLSA)
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. In regard to overtime, FLSA states this:
“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.”
Under FLSA, overtime pay is not required for hours worked on Saturdays, Sundays, holidays, or regular days of rest unless they are 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 for the purpose of calculating overtime. You can’t average 2 or more workweeks for the purpose of calculating pay or determining 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
Remember, your state may have laws that extend overtime to groups not covered by FLSA, or dictate how it is calculated or what counts as 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. 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
- Work required to be done in accordance with provisions of the Walsh-Healey Public Contracts Act
- Special contracts as exempted by the Secretary of Labor when it serves the public interest, prevents injustice, undue hardship or to prevent the impairment of government business.
CWHSSA creates pay minimums, overtime and recording keeping standards that must be followed. According to the law, those covered under the law must be paid one and one-half their basic rate of pay for all hours worked over 40 per 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.
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. This is because states have their own set of labor laws and definitions that govern what overtime is, how it is calculated and who is covered.
In Colorado, for example, employers must pay 1.5 times the regular rate of pay for overtime hours. Overtime is considered hours worked over and above:
- 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.
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. A workweek is defined as 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. This language is intended 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
Davis-Bacon and Related Acts does not require overtime, but that doesn’t mean that workers on prevailing wage projects are left out. Overtime on federal prevailing wage contracts is covered under other federal laws, FLSA and CWHSSA. So workers must be paid time and one-half the basic rate of pay for hours worked in excess of 40 hours in a workweek.
Here are some important things to understand about overtime and prevailing wages:
- Overtime is calculated 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.
- Fringe benefits are not included in the overtime calculation, so you calculate overtime only on the straight time rates.
- Non-work hours, like paid leave or required holidays, are not counted toward overtime pay.
- If a worker performs work under more than one work classification with different rates of pay, overtime can be calculated based on the weekly average. This is the total straight time pay for work at each applicable rate, divided by the total number of hours worked at 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, the 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 lists an electrician’s hourly rate as $22 and their fringe rate as $5 per hour, their total prevailing rate per hour would be $27 for all straight time hours worked under that work classification. Overtime would be calculated for any hour over 40 within the workweek and the fringe hourly rate would not be used 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.
Overtime on 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 workweek the worker logged the following hours:
|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 divide 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 ($10.74) 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 timecards and spreadsheets. Also, the employer and worker have to agree ahead of time to use this type of calculation for overtime.
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. Not understanding the law is never considered a good excuse if you’re inspected and cited 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
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.