Overtime

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Overtime

[n., adv., adj. oh-ver-tahym; v. oh-ver-tahym]

Overtime is the amount of time someone works beyond normal working hours. Normal hours may be determined in several ways:

by custom (what is considered healthy or reasonable by society),
by practices of a given trade or profession,
by legislation,
by agreement between employers and workers or their representatives.

Most nations have overtime laws designed to dissuade or prevent employers from forcing their employees to work excessively long hours. These laws may take into account other considerations than the humanitarian, such as increasing the overall level of employment in the economy. One common approach to regulating overtime is to require employers to pay workers at a higher hourly rate for overtime work. Companies may choose to pay workers higher overtime pay even if not obliged to do so by law, particularly if they believe that they face a backward bending supply curve of labour.

Overtime pay rates can cause workers to work longer hours than they would at a flat hourly rate. Overtime laws, attitudes toward overtime and hours of work vary greatly from country to country and between different economic sectors.

United States federal law

In the United States, the Fair Labor Standards Act of 1938 applies to employees in industries engaged in, or producing goods for, interstate commerce. The FLSA establishes a standard work week of 40 hours for certain kinds of workers, and mandates payment for overtime hours to those workers of one and one-half times the workers' normal rate of pay for any time worked above 40 hours. The law creates two broad categories of employees, those who are "exempt" from the regulation and those who are "non-exempt". Under the law, employers are not required to pay exempt employees overtime but must do so for non-exempt employees. Independent contractors are not considered employees and are not protected by the FLSA. Several factors determine whether a worker is an employee, who might be entitled to overtime compensation, or an independent contractor, who would not be so entitled. That an employment agreement states that a party is an independent contractor does not mean that this is necessarily so.

Classes of workers who are exempt from the regulation include certain types of administrative, professional, and executive employees. To qualify as an administrative, professional, or executive employee and therefore not be entitled to overtime, three tests must be passed based on salary basis, duties, and salary level. The tests vary between administrative, professional, and executive employees based on their different duties and salary levels. There are many other classes of workers who may be exempt including outside salespeople, certain agricultural employees, certain live-in employees, and certain transportation employees. Employees cannot waive their FLSA protections and cannot abridge them by contract.

An employer may not retaliate against an employee for filing a complaint or instituting a proceeding based on the FLSA. An employer that does retaliate would be liable under the Fair Labor Standards Act Section 216(b) for equitable relief including reinstatement, promotion, payment of lost wages, and payment of liquidated damages. Acts of retaliation include terminating employment, disrupting the workplace, threats, acts of physical violence, and constructive discharge.

Out of approximately 120 million American workers, nearly 50 million are exempt from overtime laws (U.S Department of Labor, Wage and Hour Division, 1998). In 2004, the United States was 7th out of 24 OECD countries in terms of annual working hours per worker. (See Working time for a complete listing.)

On August 23 2004, President George W. Bush and the Department of Labor proposed changes to regulations governing implementation of the law. According to one study, the changes would have had significant impact on the number of workers covered by overtime laws and have exempted several million additional workers . The Bush administration maintained that the practical impact on working Americans would be minimal and that the changes would help clarify an outdated regulation. In particular, the new rules would have allowed more companies to offer flextime to their workers in lieu of overtime. In September 2004, both chambers of Congress voted to block the Labor Department from putting these regulatory changes into effect.

Time off in lieu

Time off in lieu; compensatory time; or comp time refers to a type of work schedule arrangement that allows workers to take time off instead of, or in addition to, receiving overtime pay. A worker may receive overtime pay plus equal time off for each hour worked on certain agreed days, such as Bank Holidays.

In the United States, such arrangements are currently illegal for private sector workers under overtime laws, but the practice is legal in the public sector.

For example, under current overtime laws in the U.S., non-exempt workers must receive one and one half times their normal hourly wage for every hour worked beyond 40 hours in a work week. So, if a worker clocks 48 hours in one week, then he would receive pay equivalent to 52 hours of work (40 hours + 8 hours at 1.5 times the normal hourly wage). Comp time would permit the worker in this example to forego the 12 hours of overtime pay and instead take 12 paid hours off at some future date.

In Australia, Public sector workers are paid 1.5 times their hourly wage for the first 2 hours of overtime with any additional overtime paid at double time. A minimum of 4 hours of overtime is paid. For example, an on call microbiology scientist called in for an urgent microscopy which will take 20 minutes will be paid for 4 hours of overtime.

Working off the clock

Some employers require employees to work "off the clock" by prohibiting them from recording time actually worked; failing to compensate them for meal periods and rest breaks; failing to pay overtime for travel from shop to work-site and back; not paying overtime for time spent working while traveling; failing to pay overtime for attendance at training, meetings and lectures; failing to compensate for arriving early to perform necessary preparations for work; not paying overtime for time it takes to suit-up or put protective gear on, time waiting to log in, on-call time, or time in security line; forcing employees to work on the weekends without clocking in; or instructing them to report fewer hours than actually worked. Such practices are generally prohibited in the United States under the overtime laws for non-exempt employees.

In Japan this is a widespread, almost standard work place practice and can in extreme cases lead to the Japanese Karōshi phenomenon of death-by-overwork (usually a stroke, sometimes suicide). A firm might pay 20 hours of overtime per month but to meet their superiors' deadlines and expectations, employees will have to put in many more hours which do not show up officially. The practice is called "sabisu zangyo", "sabisu" meaning "service" and "zangyo" meaning "overtime", essentially "free overtime".

California Overtime Law

The state of California's overtime laws involve overlapping statutes, regulations and precedents that govern the compensation of employees in California. While the governing Federal law is the Fair Labor Standards Act (29 USC 201-219), California overtime law is codified in provisions of the California Labor Code and in Wage Orders of the Industrial Welfare Commission

Because there are two sources of applicable law (federal and state), a California employer must comply with both.

In California, based on California Labor Code 1171, only an employment relationship is required for overtime rules to apply. Under the California Industrial Welfare Commission Wage Orders, an "employer" is "any person ... who directly or indirectly, or through an agent or any other person, employs or exercises control over wages, hours, or working conditions of any person." Under the California Labor Code, an " employee" is "[any] person, including aliens and minors, rendering actual service in any business for an employer, whether gratuitously or for wages or pay, whether the wages or pay are measured by the standard of time, piece, task, commission, or other method of calculation, and whether the service is rendered on a commission, concessionaire, or other basis." Independent contractors are not employees covered by overtime laws, so it is important to determine if a worker is an independent contractor or an employee.

European Community (EC) Directives

Directives issued by the EC must be incorporated into law by member states.

Directives 93/104/EC (1993), 2000/34/EC (2000), which limited working hours, were consolidated into 2003/88/EC (2003). Employers and employees could agree to opt out, but this exception is to be tightened up, after the EC reported evidence that the opt-out was being abused in the UK, in a new proposal for a directive expected to be adopted in early 2006, and adopted into the law of member states within 2 years.

The Directives require:

maximum average working week (including overtime) of 48 hours
minimum daily rest period of 11 consecutive hours in every 24
breaks when the working day exceeds 6 hours
minimum weekly rest period of 24 hours plus the 11 hours daily rest period in every 7-day period
minimum of 4 weeks paid annual leave
night work restricted to an average of 8 hours in any 24-hour period

The Directives apply to:

all sectors of activity, both public and private
Doctors in training will work a maximum week of 58 hours until 2009. From 1 August 2009 their maximum working week falls to 48 hours.

Exemptions:

Member States of the EC may exempt: managing executives or other persons with autonomous decision-making power; family workers; and workers officiating at religious ceremonies. These are workers whose working time is not measured and/or pre-determined or can be determined by the workers.
Other categories can be exempted from the directive's key provisions provided compensatory rest or appropriate protection is granted. These include employees who work a long way from home, or whose activities require a permanent presence or continuity of service or production, or who work in sectors which have peaks of activity. Examples include off-shore workers, security guards, journalists, emergency workers, agricultural workers, tour guides, etc.

The conditions attached to the worker's individual consent are tightened by the proposed new Directive: member states may allow workers to opt out from the limitation of hours worked so long as this is expressly allowed under a collective agreement (e.g., with a trades union), and if the individual worker consents. The individual's consent is subject to conditions:

It cannot be given at the same time as the contract of employment is signed or during any probation period
It has to be given in writing
It is valid for a maximum of one year (renewable)
No worker can work more than 65 hours in any week
Employers are obliged to keep records of the number of hours actually worked and to make those records available to the responsible authorities if required.