An update of a popular blog post from October 20, 2015

It’s bad news when your store to gets in trouble for not paying overtime – but today there may be instances in which this extra expense is worth considering. Before making that decision, it’s important to make sure you’re in compliance with the current regulations, which are part of the federal Fair Labor Standards Act (FLSA) enforced by the Department of Labor.

“Overtime” refers to the requirement that workers be paid at the rate of one and a half time their regular pay rate for any time worked over 40 hours in a 7 day period. This practice is commonly referred to as “time and a half.” Not all employees are not covered by this mandate, which causes some confusion in the retail world.

One of the exceptions to overtime regulations concerns employees in management positions. Many retail chains take great advantage of this exception, expecting managers to work many extra hours without overtime.  But we learned the hard way (through a costly audit) that this rule is not applied evenly to stores of all sizes. An independent retailer with the owner/s present is probably not qualified to have any employee be considered a manager. 

Paying a salary instead of an hourly rate does not guarantee status as exempt from overtime. The main criteria is whether the supervision of at least two other workers is the manager’s primary duty, as opposed to serving customers and dealing with merchandise. In other words, a manager must spend most of their time on leadership – which is rarely the case with independent retailers.

Another aspect of the current overtime regulation that we have trouble with is the fact that if your store has a two week pay period, an employee can’t work 41 hours one week and 39 the other without being paid overtime for the 41st hour. In other words, hours cannot be averaged across pay periods. I’m sure that many of us would like to have more flexibility in the system — and our employees who want to work as many hours as their schedule allows would too. Under the current system, they have to be careful that they don’t surpass the 40 hour limit within any seven consecutive days.

Overtime at time and a half the usual pay rate is a cost stores understandably try to avoid. However the tight job market today often makes it difficult to hire enough staff. Judicious use of overtime pay can actually be more effective than hiring and training additional employees.  If  an employee is willing to put in a few extra hours during the holidays, we are often happy to consider some overtime a worthwhile cost of business during our busiest time.

Happy Retailing,

Carol “Orange” Schroeder