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[Author: Lesley Sifers, Tax Favored Benefits, Inc., 2012; R-2013 | Keywords: Human Resources, Wages] 

In case my articles haven’t tortured you enough, I thought it was time for a pop quiz. I have written many, many times about the Fair Labor Standards Act (FLSA) and the nuances of overtime pay. So, I thought it was time for you to take a test on the subject since I still get a lot of calls about this topic. Each problem you answer correctly is worth 25 points and the bonus question is worth 50 points.

Problem #1: Weekly pay periods. Jack works 9 hours daily Monday thru Wednesday and 10 hours on Thursday. He takes a paid vacation day on Friday. For the week, he has 45 paid hours. How many hours are paid at overtime rates?
(   ) None     (   ) 5 Hours

Problem #2: Weekly pay periods using a time clock. Jill’s work schedule is 8:00 to 5:00, M-F, with a one hour lunch. She clocks in at 7:50 am every morning and clocks out at 5:11 pm on Monday and Wednesday. On Tuesday, she clocks out for lunch but eats at her desk, takes several work-related phone calls during her lunch break, and clocks out at 4:04 pm. On Thursday, she clocks out at 5:08 pm and on Friday at 4:55 pm. How many hours are paid at overtime rates?
(   ) None     (   ) 1 Hour  (   ) 3 Hours

Problem #3: Bi-weekly pay periods. In week #1, Jack works 43 hours. In week #2 he works 9 hours Monday through Thursday. On Friday, he works 4 hours and leaves early because he is not feeling well. Your policy is to draw down PTO in ½ day increments. How many hours are paid at overtime rates?
(   ) None     (   ) 3 Hours (   ) 7 Hours

Problem #4: Semi-monthly pay periods. Jack is an accounting clerk and is paid a salary of $1,250 semi-monthly. In the period from March 15-31, Jack works 10 hours per day on March 21, 22 and 23. He works 8 hours daily on every other day in the pay period. How many hours are paid at overtime rates?
(   ) None     (   ) 6 Hours (   ) 12.75 Hours

Bonus question for Problem #4: IF Jack is eligible for overtime pay, what rate of pay can be used to calculate the overtime amount?
(   ) $14.42 per hour        (   ) $13.49 per hour

See how you did. Check your answers below.

Problem #1: The correct answer is “none” because you are not required to count time not worked when calculating overtime. Jack worked 37 hours during the week; vacation is “time not worked.”

Problem #2: The correct answer is “3 hours.” When using a time clock, you must count the time in the smallest increment in which you pay people. Generally, it’s 15 minutes. If someone clocks in or out more than 8 minutes before start time or after quitting time, it’s counted as 15 minutes. Likewise, clocking in or out less than 8 minutes before or after the hour is considered “on the hour.” For Jill, clocking in and out has added 2 hours to her time worked for the week.

But, there is a second situation with this problem. Jill ate lunch at her desk and answered work-related phone calls. In order for a lunch break to be unpaid, the employee must be “completely relieved of duty.” Even though Jill chose to eat at her desk and answer the phone, it still converts her lunch into work time and adds another hour to her work week.

You can prevent some of these problems by making rules about eating at your desk or work station and clocking in early or out late. Or, you can ignore it. But in the end, you should be counting time appropriately and applying overtime when applicable.

Problem #3: The correct answer is 3 hours. Overtime rules are based on work weeks, not pay periods. If you pay bi-weekly, you must still observe a work week defined as seven consecutive 24-hour periods. Because Jack worked 43 hours in the first week of the period, he is due 3 hours of overtime pay. Even though his hours in week two total 44, that include 4 hours of paid time not worked so there is no overtime due for week two.

Problem #4: The correct answer is 6 hours. It’s always a problem when non-exempt workers are paid a set salary and semi-monthly pay periods only make it worse. To the DOL, it doesn’t matter if you pay a salary. You must calculate hours based on a 40-hour work week for non-exempt workers. The other answer (12.75) is based on a presumption of hours for salaried employees (2,080 hours annually divided by 24 pay periods to equal 86.67 hours per pay period). If you added 6 hours to that, you would get 92.67 hours. That would be 12.75 hours (rounded in 15 minute increments) for a roughly two week period.

Bonus question: The correct answer is $12.49 per hour for an OT rate of $20.24. For a non-exempt person on a salary, you have to establish an hourly rate for overtime. It is permissible to calculate the rate on a pay period basis. Jack’s salary was $1,250 for a pay period of 86.67 hours, but when he worked 92.67 hours, it reduced his hourly rate. In this situation, when someone regularly works overtime, it’s a hassle to calculate hourly rates every pay period. It’s easier to have them turn in time sheets or punch the clock. Once they see that they are getting paid a bit more, it usually goes better for everyone.

How did you score? If you scored 25-50 points, it’s time to bone up on FLSA before the DOL stops by to audit your payroll. If you scored 75-100, you are close to getting it right. If you scored 150 points, you could pass a DOL audit with only small fines (believe me, they will find something). Now, if you are the owner or manager of your company, why not ask the payroll person to take this quiz? Of course, that would be work time, especially if that person skips lunch to take some silly quiz!