What You Need to Know About FLSA Overtime Pay

FLSA overtime pay is the extra compensation — at least 1.5 times your regular hourly rate — that most U.S. workers are legally owed when they work more than 40 hours in a single workweek.

Here's what the law requires at a glance:

You worked the extra hours. You put in the late nights, the early mornings, the weekends. And then your paycheck didn't reflect any of it.

If that sounds familiar, you're not alone — and you may have rights.

The Fair Labor Standards Act (FLSA) has protected workers' right to overtime pay since 1938. But the rules are complicated. Employers misclassify workers. Bonuses get calculated wrong. Exemptions get misapplied — sometimes on purpose.

Wage theft is one of the most common — and least talked about — workplace violations in America.

This guide breaks down exactly how FLSA overtime works: who qualifies, how it's calculated, what exemptions actually mean, and what you can do if your employer isn't paying you what you're owed.

Understanding FLSA Overtime Pay and Coverage Requirements

To understand your rights, we have to look at the foundation of American wage law: the Fair Labor Standards Act. This federal law establishes the baseline for the federal minimum wage (currently $7.25 per hour since July 24, 2009), youth employment, recordkeeping, and—most importantly for this guide—overtime standards.

Under the FLSA, unless an employee is specifically exempt, they must receive overtime pay for all hours worked over 40 in a single workweek. This overtime rate must be at least one and one-half times their regular rate of pay.

But who exactly is covered by these federal rules? The FLSA uses two methods to determine coverage:

1. Enterprise Coverage: An entire business is covered if it has an annual gross volume of sales or business done of at least $500,000, or if it is a hospital, a business providing medical or nursing care, a school, or a government agency.
2. Individual Coverage: Even if the business doesn't meet the $500,000 threshold, individual employees are covered if their daily work involves "interstate commerce." This is an incredibly broad standard. It includes making phone calls to other states, processing credit card transactions, shipping goods across state lines, or even handling materials that originated outside of your state.

Because of these broad standards, the vast majority of workers in Michigan and Illinois are protected by federal overtime laws.

Recordkeeping and Compliance Rules

Employers can't just pay you whatever they feel like under the table. The FLSA requires employers to keep precise and accurate records of hours worked and wages paid. According to the Handy Reference Guide to the Fair Labor Standards Act | U.S. Department of Labor , employers must display an official FLSA poster in a conspicuous place and maintain records containing:

• Personal employee information (name, address, occupation).
• Total hours worked each workday and each workweek.
• The regular hourly rate of pay for any week overtime is worked.
• Total daily or weekly straight-time earnings.
• Total premium pay for overtime hours.

If an employer fails to maintain these records or violates child labor laws, the penalties are steep. For example, the maximum civil monetary penalty for repeated or willful violations of child labor standards that cause serious injury or death of a minor is $145,752 on or after January 16, 2025. Employers who willfully or repeatedly violate minimum wage or overtime laws can also face civil penalties of up to $2,515 per violation.

Exempt vs. Non-Exempt Status Under the FLSA

A common point of confusion is the difference between "exempt" and "non-exempt" employees.

• Non-exempt employees are fully protected by the FLSA. They must receive at least the minimum wage and are legally entitled to FLSA overtime pay when working more than 40 hours in a workweek.
• Exempt employees are excluded from these overtime protections.

However, employers cannot simply label an employee "exempt" or pay them a salary to avoid paying overtime. As detailed by the Overtime Pay | U.S. Department of Labor , exemption status is determined by specific legal criteria, not by your job title or how you are paid.

The Three Tests for FLSA Overtime Pay Exemptions

To classify an employee as exempt under the standard "white-collar" exemptions (Executive, Administrative, and Professional), an employer must prove that the employee passes three distinct tests:

1. The Salary-Level Test: The employee must be paid at least a minimum weekly salary.
2. The Salary-Basis Test: The employee must receive a predetermined, fixed salary that does not fluctuate based on the quality or quantity of the work performed.
3. The Duties Test: The employee’s actual day-to-day job duties must meet the strict legal definitions of executive, administrative, or professional work.

Let's look closer at the current salary-level threshold. While the Department of Labor attempted to raise the salary thresholds in 2024, a federal court in Texas blocked and invalidated those increases. Consequently, the federal minimum salary required for executive, administrative, and professional exemptions reverted to $684 per week ($35,568 annually) on November 15, 2024.

If you are paid less than $684 per week, you are non-exempt, regardless of your job duties. Furthermore, if you are a highly compensated employee (HCE), the annual threshold is $107,432 (with at least $684 paid weekly on a salary basis).

Many workers ask: Can an employer force an hourly employee to be a salaried employee in order to not pay overtime? The answer is no. Merely switching someone to a salary without meeting the strict duties test is a clear violation of the FLSA.

State Overtime Laws vs. Federal FLSA Overtime Pay Rules

One of the most important principles of wage and hour law is the "more protective" rule. If a state or local law provides greater protection or a higher wage than federal law, the employer must follow the state standard.

Because our firm serves clients in Michigan and Illinois, let’s look at how these states compare to federal rules. If you are wondering, "Am I entitled to overtime pay if I work more than 40 hours a week," the answer depends on both federal rules and these local state standards.

How to Calculate the Regular Rate of Pay for Overtime

Many people assume that calculating overtime is as simple as taking their hourly rate and multiplying it by 1.5. However, the FLSA requires overtime to be calculated based on your regular rate of pay, which is not always the same as your base hourly rate.

The regular rate of pay is an hourly rate derived by dividing your total remuneration (pay) in a workweek by the total number of hours you actually worked in that week.

According to the HIGHLIGHTS OF THE FINAL RULE ON REGULAR RATE UNDER THE FAIR LABOR STANDARDS ACT | U.S. Department of Labor , certain perks and benefits are explicitly excluded from this regular rate calculation, while others must be included.

What’s Included vs. Excluded in the Regular Rate

• Must be INCLUDED:
  • Shift differentials (e.g., extra pay for working night shifts).
  • Nondiscretionary bonuses (bonuses promised in advance or tied to productivity, attendance, or quality).
  • Commission payments.
  • Retroactive pay.
  • Goods or facilities provided by the employer (valued at reasonable cost).
• Can be EXCLUDED:
  • True discretionary bonuses (where the employer decides both the fact and amount of payment close to the payout date without a prior agreement).
  • Gifts (such as holiday bonuses not tied to performance).
  • Payments for time not worked (vacation, sick leave, holidays, or jury duty).
  • Reimbursed business expenses (following IRS or Federal Travel Regulation guidelines).
  • Modern wellness perks (wellness programs, gym memberships, on-site specialist treatments, and employee discounts).

Calculating Overtime with Bonuses and Multiple Pay Rates

If you receive bonuses or work at multiple different rates of pay in a single week, calculating your overtime requires a few extra steps.

The Weighted Average Method (Multiple Rates)

If you work two different jobs for the same employer at different rates (e.g., $15/hour as a clerk and $20/hour as a supervisor), your regular rate is the "weighted average" of those rates.

• Step 1: Multiply each rate by the hours worked at that rate to find your total straight-time pay.
• Step 2: Divide your total straight-time pay by the total hours worked in the week. This is your regular rate.
• Step 3: Multiply your regular rate by 0.5, and then multiply that half-time premium by the number of overtime hours worked. Add this to your straight-time pay.

The Fluctuating Workweek Method (The "Bonus Rule")

Under 29 CFR 778.114, if your hours fluctuate from week to week and you have a clear agreement with your employer that you will receive a fixed salary as straight-time pay for whatever hours you work, your employer may use the fluctuating workweek method.

As clarified in Fact Sheet #82: Fluctuating Workweek Method of Computing Overtime Under the Fair Labor Standards Act (FLSA) / “Bonus Rule” Final Rule | U.S. Department of Labor , any non-discretionary bonuses or incentive pay must still be added to your salary before dividing by the total hours worked to find your regular rate. You are then owed an additional 0.5 times that regular rate for every hour worked over 40.

Federal Employee Overtime Calculations under OPM Rules

If you are a federal employee, your overtime is governed by the Office of Personnel Management (OPM) rules, which operate slightly differently than standard private-sector rules.

Under OPM rules, total remuneration includes basic pay, night pay differentials, Sunday premium pay, and any applicable special rate supplements or locality payments.

For example, as outlined in Fact Sheet #23: Overtime Pay Requirements of the FLSA | U.S. Department of Labor , if a GS-7 Step 1 employee works 52 hours in a workweek, their overtime pay includes both their straight-time rate for those hours plus one-half of their hourly regular rate of pay multiplied by the 12 overtime hours.

The New Overtime Tax Deduction and Qualified Compensation

In July 2025, a major piece of federal legislation—the One Big Beautiful Bill Act—introduced a brand-new tax benefit for hard-working Americans. Under this law, eligible workers can claim a tax deduction for their qualified overtime compensation starting in their tax filings.

According to IRS Fact Sheet FS-2026-01 (and detailed in the One Big Beautiful Bill Act - No Tax on Overtime Provision ), here is how the deduction works:

• The Deduction Limit: You can deduct up to $12,500 of qualified overtime compensation per year ($25,000 for joint returns).
• Qualified Overtime: Only the premium portion of your overtime pay (the "half-time" premium required under Section 7 of the FLSA) qualifies for this deduction. If your employer pays you double-time, only the half-time portion required by federal law is deductible.
• Income Phaseouts: The deduction begins to phase out if your Modified Adjusted Gross Income (MAGI) exceeds $150,000 ($300,000 for joint filers).

Frequently Asked Questions About FLSA Overtime

Navigating wage laws can feel like learning a foreign language. Here are some of the most common questions we receive from workers in Michigan and Illinois.

Can my employer require me to work overtime?

Yes. Under the FLSA, there is no limit on the number of hours an employee aged 16 or older can work in a workweek. Your employer can legally require you to work mandatory overtime. However, they must pay you the proper overtime rate for those hours. For more details on this, check out our guide: Can my employer require me to work overtime.

Can my employer require me to sign a waiver giving up my right to overtime pay?

Absolutely not. Your right to overtime pay is established by federal law and cannot be waived. Any agreement, contract, or waiver you sign giving up your right to overtime is completely legally unenforceable. Learn more about this protection here: Can my employer require me to sign a waiver giving up my right to overtime pay.

Can I sue my employer for unpaid wages or overtime?

Yes. If your employer has failed to pay you the overtime wages you earned, you have the right to file a lawsuit to recover those wages. Under the FLSA, you can recover:

• Back Pay: The unpaid overtime wages you are owed.
• Liquidated Damages: An additional amount equal to your back pay (effectively doubling your recovery) if the violation was not in good faith.
• Attorney Fees: The employer may be forced to pay your legal fees if you win.

The statute of limitations for filing an FLSA claim is generally two years, but it can be extended to three years if we can prove the employer's violation was willful. You can also join or file a collective action with other coworkers who were unpaid. Read more about your legal options: Can I sue my employer for unpaid wages or overtime.

Conclusion

If you believe your employer has misclassified you as exempt, failed to calculate your regular rate of pay correctly, or simply refused to pay you for your overtime hours, you don't have to fight them alone.

At Marko Law, we are dedicated to protecting workers across Detroit, Mount Pleasant, and Chicago. We specialize in employment law and have a proven track record of securing over $500 million in client recoveries. We work on a contingency fee basis—meaning we offer free consultations, and you pay absolutely no fees unless we win your case.

Don't let your hard work go uncompensated. Contact us today at https://www.markolaw.com/contact  or call +1-313-777-7777 to schedule your free, confidential case evaluation. Let us help you claim the wages you legally earned.