The law states that employees who are not exempt from the Fair Labor Standards Act (FLSA) must be paid overtime if they work more than 40 hours in a workweek.
But what if your company has a policy for authorizing overtime, and one or multiple employees get overtime without it being preauthorized?
You still need to pay for it. The FLSA requires payment for all overtime hours worked, whether they were authorized or not.
Now, you may have some legal recourse as far as employees who continuously work overtime when it isn’t authorized according to company policy. But either way, unauthorized overtime still needs to be paid.
Unauthorized overtime happens, sometimes when someone willingly abuses the system and sometimes for more innocent reasons. But it needs to be addressed as soon as possible, regardless of the reason, to prevent it from getting out of control. To help you navigate and prevent unauthorized overtime, this guide offers facts about overtime law, common causes of unauthorized overtime, and a few helpful strategies to address unauthorized overtime.
Note that I don’t offer legal advice, and you should always consult relevant laws and an employment attorney before making any business and employment decisions.
Why Unauthorized Overtime Must Be Paid
By law, overtime is extra pay for hours worked past 40 in a workweek. The FLSA specifically states that employees who are not exempt from FLSA regulations are entitled to 1.5 times their regular rate of pay for those extra hours.
Overtime is part of payroll compliance. To align your payroll processes with the law, you need to account for potential overtime on your team and pay it properly when it happens.
To be classified as a non-exempt worker for the purpose of the FLSA, your employee must not fall into any of the exempt categories. The FLSA provides exemptions for certain executives, professionals, administrative workers, and highly compensated workers who earn a minimum salary—typically equating to at least $684 per week.
All non-exempt workers must be paid overtime if they earn it. A non-exempt worker working 45 hours in a workweek should get paid for five hours of overtime, while one earning just five minutes of overtime must also be paid an overtime rate for those five minutes.
The FLSA even requires employers to pay workers if they earn overtime that isn’t authorized. According to § 785.11 of the FLSA, “Work not requested but suffered or permitted is work time.” This means that, regardless of whether an employee had permission to work overtime, their overtime still counts as compensable work time.
Say, for example, you have a clear policy that workers must submit a request to management if they need to come in early or stay late to complete work tasks, which may push them into overtime.
One employee stayed three hours after their scheduled shift on Friday to finish a project but forgot to get approval for the extra hours. He ended up with three hours of overtime. You still need to compensate him for those three hours of overtime, even though they weren’t authorized according to your policy.
Because the employee broke the terms of your policy, it’s possible that you could take disciplinary measures against the employee. Continuous violations could even lead to termination. But, again, that’s something to discuss with your employment attorney.
Either way, overtime is due in this case, and you need to pay it according to the FLSA’s regulations.
Now, if an employee is exempt under the FLSA and works past their usual hours, they aren’t eligible for overtime pay, so you aren’t required to pay an overtime rate. However, if you have a policy allowing overtime for exempt employees, you need to stick to that policy, even if it means paying for unauthorized overtime.
Causes of Unauthorized Overtime
Unauthorized overtime can happen for a number of reasons, but it usually boils down to one primary culprit: a lack of oversight.
The most common reason for unauthorized overtime is simply not following company policy. Many companies include boundaries for overtime in their policies, such as capping overtime at a specific number of hours per employee per week or month.
However, employees may not follow this policy strictly if management doesn’t monitor their overtime as it should.
For example, let’s say your company policy requires workers to get a preauthorization for any overtime they think they might need. The policy might be strict when first implemented, but after a while, it isn’t regularly enforced.
Workers see that management doesn’t seem to care when they get overtime hours, so they stop submitting requests, and management doesn’t do anything about it until overtime hours become an unignorable problem.
On the flip side, management can also abuse overtime. Maybe they routinely ask one or two employees to stay late to pick up the slack of an unproductive employee, leading to several hours of overtime weekly.
Unauthorized overtime doesn’t always stem from mismanagement, though. Other causes are more innocent, like making mistakes in scheduling or employees forgetting to clock out for breaks.
In other cases, unclear policies can be to blame. For instance, maybe your company policy doesn’t clearly state that employees shouldn’t clock in early without approval. When several employees do this each day, even if just 5-10 minutes early, that time adds up and could hedge into overtime.
How To Address Unauthorized Overtime
Unauthorized overtime can cause a lot of damage if it’s not taken care of quickly. First, you’ll likely need to figure out the reason behind the unauthorized overtime, like whether it leans more on the employee’s or manager’s side.
Either way, the issue at least partly falls on the manager who’s responsible for monitoring overtime. Speak with both the employee and their manager to determine the root cause of the problem. Why was the employee working overtime? Why wasn’t it requested according to company policy? And why wasn’t it caught earlier?
Remember that even if the employee’s overtime wasn’t authorized, it still needs to be paid.
Then, address whatever the problem is that caused the unauthorized overtime. It could be overtime abuse by the employee, unclear policies, or a lack of oversight by management. Any of these issues can have serious effects on your payroll budget and need to be taken care of.
Be sure to speak with an employment attorney regarding consequences for any issues that go against your company policies.
Finally, take measures to prevent unauthorized overtime from happening again in the future.
One of the best ways to do this is by diligently tracking hours. Payroll software for your business can do this. The best payroll services not only calculate payroll for you, but they’ll also monitor your scheduling needs and make suggestions accordingly, plus alert you if anything looks like it could lead to unnecessary overtime.
Next, look at your overtime policy. Is it as clear-cut as you think it is? If you’re having issues with overtime, there’s a chance that your policy might have some gaps that blur the lines of what’s acceptable or not regarding overtime. Consider asking an employment attorney and a few people outside of your organization to read through your policy and provide feedback.
Most importantly, make sure your policy has detailed guidelines for authorized overtime. Outline the steps employees and managers need to take to request and approve overtime and the consequences of not following those steps.
Keep all managers on the same page by hosting a refresher workshop or requiring them to complete an online training annually to increase compliance.
You can also check out these overtime management tactics to keep overtime on track.
