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Steptoe & Johnson PLLC: Overtime Issues Troubling the Energy Sector

By Lindsay M. Bouffard 

As a result of the expansion of oil and gas activities in the region and the increasing jobs associated with the expansion, the Department of Labor has been stepping up its enforcement initiative for oil and gas companies and related businesses. Because of this, it has become more important than ever to ensure that employees are being paid overtime properly. Here are a few issues that often arise with calculating overtime pay.

Establishing a workweek - A workweek can be any seven consecutive 24-hour periods.  It can begin on any day and at any hour, and different workweeks can be established for different employees.  However, once an employee’s workweek is established, it remains fixed regardless of the hours the employee is scheduled to work, and it can’t be changed unless the change is intended to be permanent and is not designed to evade the overtime requirements. In most cases, an employee’s time worked cannot be averaged over two or more workweeks.  If an employee works 50 hours in the first workweek of a pay period and 30 hours in the second workweek, the employee must be paid at the overtime rate for 10 hours.

Regular rate of pay - When a non-exempt employee works overtime, he or she is entitled to be paid one and one-half times his or her “regular rate” for the overtime hours.  An employee’s regular rate includes all payments for employment except for certain payments excluded by the FLSA.  Exclusions include pay for expenses, premium payments for work on Saturdays, Sundays, and holidays, discretionary bonuses, gifts, and payments for when no work is performed. Other payments must be allocated over the workweeks to which they apply and figured into the employee’s regular rate for those weeks.

Vacation and holidays - The FLSA requires overtime pay only for hours worked in a workweek.  If an employee is paid for a holiday or vacation day when he or she doesn’t work, the hours for that day don’t count for that workweek for purposes of overtime.  For example, if an employee works 40 hours in a week and is paid 8 hours for a holiday, that 8 hours does not need to be paid as overtime.

This update barely scratches the surface of overtime issues that may arise.  It is best to sort these issues out before the Department of Labor decides them for your business.

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