Managing Unauthorized Overtime: What Employers Can Do Under The FLSA

Paying employees accurately for the time they work is critical to their satisfaction – and your compliance with the Fair Labor Standards Act. But when you’re calculating hours to process payroll, you may notice that some workers are working unauthorized overtime. If that happens, do you have to pay them for these hours? The answer is yes, but there are also steps you can take to minimize overtime abuse going forward.

At Complete Payroll Solutions, we’ve been processing payroll for clients for over 18 years. We understand how complex payroll can be, especially when it comes to correctly calculating and paying employees for the hours they work – even when not authorized. To help you best manage unauthorized overtime in your company, in this article we’ll discuss:

Are my employees covered by the FLSA
What does FLSA overtime mean
What constitutes unauthorized overtime
Do I have to pay for unauthorized hours worked
What are the penalties for not paying unauthorized overtime
How do I implement an unauthorized overtime policy

After reading this article, you’ll understand your obligations for paying unauthorized overtime under the FLSA as well as steps you can take to minimize overtime abuse.

Are my employees covered by the FLSA?

The FLSA is a broad federal law that governs several areas of the employer/employee relationship -- and almost all businesses. In fact, more than 143 million American workers are protected by the FLSA so the law covers most employees — and likely yours. Specifically, the FLSA covers:

Employees of any enterprise engaged in interstate commerce
Employees of any enterprise engaged in the production of goods for interstate commerce; or
Employees of an enterprise with annual revenues exceeding $500,000

Keep in mind that you’re not required to pay exempt workers for any hours worked over 40 in a single workweek. While there are several exemptions to the FLSA’s overtime pay requirements, the most common is the white-collar exemption. This exclusion applies to:

Executive, administrative, and professional employees
Outside sales employees
Employees in certain computer-related occupations
Highly compensated employees

What does FLSA overtime mean?

The FLSA contains many elements that employers need to be aware of, including overtime pay rules. The law’s overtime provisions require that you pay employees at least 1.5 times the regular wage rate for all hours worked over 40 in one workweek, which is defined as seven consecutive 24-hour periods.

You need to pay the overtime during the payroll period in which the employee earned it. That means if you pay weekly, then it must be paid weekly. If your payroll is bi-weekly, then you’ll pay it bi-weekly, although the amount is still based on a 40-hour workweek.

What constitutes unauthorized overtime?

Unauthorized overtime occurs when a non-exempt employee works more than 40 hours in a single workweek and has not requested it or had a manager agree to it in advance. Some typical real-word examples of this include:

When a piecemaker voluntarily continues to work at the end of the shift to finish an assigned task.
An employee who spends hours checking and responding to emails from home after the end of their shift.
Workers who decide to work through their “unpaid” lunch break.

Do I have to pay for employees for unauthorized overtime?

As we mentioned earlier, the FLSA requires that employees be paid at least one and a half times the regular wage rate for all hours worked over 40 in one workweek. When calculating the number of hours an employee works, you’ll need to include all compensable time, which includes unauthorized work time if you know or have reason to know about it. Essentially, if the employee works over 40 hours a week in any way, you’re liable for compensating them for it.

So, even if you have a policy in your employee handbook that states overtime must be approved by a manager in advance, if an employee works it anyway – in violation of the policy – you still must pay them. That’s because the FLSA considers “work not requested but suffered or permitted” to be work time. The reason doesn’t matter; if you know or have reason to believe the employee is continuing to work, that time is working time.

What are the penalties for not paying unauthorized overtime?

If you don’t pay overtime when it’s due, you have to pay back wages for the time worked. If you neglect to pay overtime properly and a complaint is filed with the DOL, you’ll pay damages, penalties, and a fine. For employers who willfully or repeatedly violate the overtime requirements, you could face a civil monetary penalty of up to $1,000 for each violation.

You may also face additional damages if you violate state labor laws. In Massachusetts, for example, you would pay treble (triple) damages for failure to pay overtime.

How do I implement an unauthorized overtime policy?

Since overtime abuse can be costly, you can take steps to limit unauthorized overtime. The best way to do this is to establish a policy that prohibits unauthorized overtime. Be sure to inform all employees about the policy and implement procedures to help you enforce it. For example, you can:

Track employee hours daily
Set up overtime alerts when employees near their maximum regular hours
Require employees to seek approval in advance before working any overtime
Training managers and supervisors about how to enforce your policy consistently

While clearly communicating a policy prohibiting unauthorized overtime doesn’t relieve you of your obligation to pay employees for all hours worked, by enforcing the policy and disciplining employees who violate it, you may be able to minimize overtime abuse.

How to Best Ensure Overtime Compliance

When non-exempt employees choose on their own to work after their scheduled hours, the bottom line is that you’re required to pay them for the time. The key to preventing unauthorized overtime is to have a clear policy that’s communicated to all employees and spells out the consequences of violating it. If they continue to abuse overtime, then it becomes a disciplinary issue.

To help create effective workplace policies, you may consider outsourcing the task to an HR provider. To understand how to find the best outsourced HR partner for your needs, check out our checklist of the factors to consider.