An Alabama Employer’s Guide to Overtime Rules

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Overtime laws in the U.S. are designed to ensure employee rights, and as an employer, knowing what rules to follow can be complex.  This is because even though the federal Fair Labor Standards Act (FLSA) sets standard requirements, each state can set its own overtime laws.  If a state does not have regulations in place, FLSA’s requirements apply. If a state DOES have overtime laws, either those laws OR the FLSA requirement will apply. The rule is that the most “employee-friendly” rules apply… and that can be difficult to decipher.  Luckily for local employers, there are no overtime laws in Alabama, so employers are beholden to the federal laws.

Current Overtime Regulations

As stated above, the federal rules regarding overtime are explained in the Fair Labor Standards Act (FLSA).  Changes to the FLSA rules were made in 2020 to update the minimum weekly standard salary level to reflect growth in wages and salaries. Scroll over each circle below to learn the basics of current regulations.

Who is Eligible for Overtime Pay?

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Hourly Employees

Employee pay structure is generally classified as "hourly" or "salaried".

Hourly employees are paid for every hour they work, which means they are entitled to overtime pay. Salaried employees earn the same amount each paycheck, regardless of hours worked.
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Over 40 Hours

40 hours is the threshold. An hourly employee becomes eligible for overtime pay for ANY amount of time worked over 40 hours within one workweek.

An hourly employee who works 40 hours and 30 minutes within one week should receive overtime pay for those 30 minutes.
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For a salaried employee to be exempt from OT rules, their pay must meet the “standard salary level” of $684 per week (equivalent to $35,568/year). Bonus or incentive pay can make up 10% of this annually.

For “highly compensated employees" (HCEs) the threshold is $107,432 per year.

Are there Limitations?

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No Limit on Hours

There is no limit for number of overtime hours an employee can work (as long as they are older than 16 years of age).
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Follow a Workweek

OT applies when someone works over 40 hours within a "workweek".

A workweek period doesn't have to follow a "calendar" week of Sunday-Saturday, but is considered the fixed and regularly recurring period of 168 hours (7 consecutive 24-hour days).
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Organizational Workweek

Different workweeks can be established for different employees/employee groups within an organization.
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Weekends or regular days of rest are NOT considered overtime unless the employee has worked 40 hours within the week period.
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No Averaging

Employers are not allowed to "average" workweek hours. If an employee works 42 hours one week and 38 hours the next week, you must pay the 2 hours of overtime on the week with 42 hours worked.
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No Subbing for PTO

The overtime hours must be compensated by payment. Under the Federal (and thus Alabama) rules, overtime worked can't be turned into paid time off or substituted for any other benefit.

How Does Overtime Payment Work?

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One And a Half Pay

For the overtime hours worked, employees must receive a rate of no less than time and a half of their regular pay.
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OT Pay Date

Overtime pay earned in a workweek must be paid on the regular pay day for the pay period in which the wages were earned.

Avizo Payroll Solutions

If you’re reading this and feeling overwhelmed, Avizo has several solutions available.  We can set you up with software to track employee time, find simpler payroll software, or even be your outsourced provider. If you want to do more research on overtime rules before making any big decisions, we recommend visiting the Department of Labor’s website for more guidance, online tools, posters, and more. 

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Crissy Bonifay

Crissy is Avizo’s payroll pro. Having been with the firm for 25 years, she’s developed many talents, and we rely on her to be our go-to guide for payroll deadlines, processes, and software.

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