Q: My employees' regular workweek is 60 hours (six days at 10 hours per day). We normally pay 40 hours at straight time, and 20 hours at time and a half. However, when an employee takes a paid day off, or if a paid holiday falls within the workweek, we only pay 40 hours at straight time and 10 hours at time and a half. Is this legal?
A: From your question, it is assumed that, for workweeks in which an employee takes a paid day off or in which a paid holiday falls, you pay that employee at the regular rate of pay for the paid day off (or for the holiday), plus straight pay for the 40 hours worked, plus 10 hours at time and a half--in total, paying 50 hours at straight time, plus 10 hours at time and a half. Assuming these facts are true, and assuming you have no separate contractual agreement with your employees that provides otherwise, the short answer to your question is yes, this is legal.
The Fair Labor Standards Act (FLSA), which is the federal law governing minimum wage and overtime requirements, provides that covered nonexempt employees must be paid at least minimum wage for all hours that they are "suffered or permitted to work," and that they be paid a special overtime premium pay for hours worked over 40 hours during a workweek. A workweek is generally a fixed 168 hours, or seven consecutive 24-hour periods, as established by the employer. The FLSA generally does not require that employees be paid overtime for working more than eight hours per day.
However, if there is a collective bargaining agreement in place that provides otherwise, the terms of that agreement will govern. Similarly, there may be specific state or local laws that apply. For instance, some states require overtime pay for more than a set number of hours in a day or other types of premium pay, in which case employers must follow these requirements. In addition, for certain types of employees, such as those that work for hospitals or medical establishments, there are other rules to consider as well. For example, overtime pay for certain hospital workers may be calculated on either a 14-day, 80-hour work period or the seven-day, 40-hour workweek. There are also special rules for public employees. For instance, public police and fire agencies with five or more employees are subject to specific exemptions from overtime provisions altogether.
To summarize, aside from these specific exceptions, and notwithstanding individual state or local laws, employers are generally required only to pay employees at straight time for those hours worked up to 40 hours per week, and time and a half for those hours worked over 40. This requirement only requires employers to compensate employees for those hours actually worked.
As in your situation, employers often allow employees to take paid time off and to take off holidays, and therefore the question inevitably arises--does the paid time off, or the holiday, count toward the 40 hours for purposes of calculating how many hours an employee works during the week and for purposes of calculating overtime? Because the FLSA only requires overtime compensation for those hours actually worked over 40, the 10 hours (as in your example) that is taken as paid leave or for a holiday is not counted, as the employee was not actually working.
Therefore, notwithstanding state or local laws or any contracts with your employees that provide otherwise, it is perfectly acceptable to pay your employees for the 10 hours off at their regular rate of pay, plus the 40 hours actually worked at their regular rate, plus the additional 10 hours worked at time and a half.
Note: The information in this column is provided by the author, not Entrepreneur.com. All answers are general in nature, not legal advice and not warranted or guaranteed. Readers are cautioned not to rely on this information. Because laws change over time and in different jurisdictions, it is imperative that you consult an attorney in your area regarding legal matters and an accountant regarding tax matters.
Larry Rosenfeld is co-chair of the national labor and employment practice of the law firm Greenberg Traurig LLP. A frequent writer and lecturer on employment law topics, Rosenfeld is experienced in the areas of federal laws pertaining to employment issues, EEOC, ADA, termination matters, employment liability and the Fair Labor Standards Act.