Overtime, Wage and Compensation Employment Law

Overtime pay is partially governed by the rules set forth in the Fair Labor Standards Act (“FLSA”). Whether an employee is eligible for overtime pay depends on whether the employee is classified as an “Exempt Employee” or a “Non-Exempt Employee” under the FLSA.

Generally, employees deemed exempt by the FLSA are those employees who are salaried and occupy a managerial position. For these employees, the job title the employee holds is not determinative of whether they are to be paid overtime under the FLSA. Rather, exempt employees often manage or direct employees and require advanced education. Thus, what determines whether an employee is exempt is the actual responsibilities the employee performs. For simplification purposes, exempt employees are typically classified as the following: executives, administrative, and professionals. To be exempt, however, salaried employees must receive a weekly salary of at least $455.00 in addition to the aforementioned.

Non-exempt employees are those individuals who work hourly and salary and are not specifically exempt from being paid overtime. That is, non-exempt employees often do not have managerial responsibilities. To qualify for overtime pay, non-exempt employees must work in excess of 40 hours in a 7-day workweek. For purposes of calculating the 40 hours worked, only hours actually worked may be included. That is, holiday pay or sick pay does not count towards the 40 hours. Furthermore, because a workweek is defined as a period of seven consecutive days, hours worked in excess of 8 hours on any single day may not require overtime pay if the employee has not worked 40 hours during the workweek.

In determining the amount due for overtime, the typical method of calculation is generally based on an employee’s regular pay rate. Each hour worked in excess of 40 hours must be paid at one and one-half rate of pay. For employees whose regular pay rate is less than the minimum wage, the legal minimum wage rate is substituted as the employee’s regular rate of pay.

Wage claims can include claims for regular unpaid wages, unpaid overtime pay, and claims that an employer has paid the employee below the minimum wage rate.

In Illinois, payment of employees is governed by the Illinois Wage Payment and Collection Act (“Act”). The Act provides rules relating to procedures of how an employee should be paid, when an employer may deduct from an employee’s wages, when and how an employee must be paid final compensation, and penalties for any violations of the Act.  The Illinois Department of Labor helps enforce the Act.

As of 2014, the minimum wage in Illinois is currently $8.25 per hour for those individuals who are 18 years and older. Individuals under 18 years of age may be paid at the rate of $7.75 per hour, but may not be paid less. Failure to pay an employee at or above these rates can result in an employer being liable for past due wages. The employer may further be liable for interest on the amount due, penalties, and the employee’s reasonable attorney fees incurred in an attempt to recover their wages.

Compensation relating to tipped employees differs from that described above. As of 2014, tipped employees must receive at least the minimum wage, though an employer may elect to pay the employee only $4.95 per hour and use the employee’s tip as a credit for up to 40% ($3.30) of the minimum wage.   There are other requirements for an employer to take the tip credit.

The Act also provides for regulations relating to when an employer may deduct from an employee’s wages.  It is illegal for an employer to unilaterally deduct from an employee’s wages without the employee’s voluntary and signed consent. Under the act, an employer may only deduct from an employee’s wages under the following circumstances: when the deductions are (1) required by law, (2) to the employee’s benefit, (3) in response to a valid wage deduction order or wage assignment, (4) with the express written consent freely given at the time the deduction is made, (5) by certain entities for certain debts, or (6) the result of an accident over payment. Finally, even if an employer receives an employee’s consent to deduct from the employee’s wages when the employee starts the job, the employer is required to receive the employee’s written consent each individual time the employer makes a deduction.

Our Illinois employment law firm litigates wage, overtime and compensation disputes for employers and employees.