Overtime rules: the simple, the complex and the scary!

Complex employee overtime rules make calculating payroll a challenge. Get it wrong, and your workers don't get the pay they're entitled to. Get it really wrong, and your company can get sued or sanctioned.

With years of experience, payroll managers become familiar with the rules they deal with on a daily basis. But unique state requirements and contract provisions in collective bargaining agreements add layers of complexity to already complex labor rules.

U.S. labor rules

State laws can be more restrictive than U.S.laws,but they can't be less restrictive. In many states, these federal laws are the starting point for more complex overtime rules set by state legislatures:

Employers pay workers time and a half after 40 hours of work per week.
Overtime is based on the hours employees work in a week, even if you pay them biweekly.
Employers must pay overtime even when it wasn't authorized in advance.
Salaried employees aren't necessarily exempt from overtime rules.
Eligibility depends on job duties and other criteria that vary from state to state.
Minors get special treatment as determined by state law. If you employ workers under 18, know your state's rules and follow them.

The California Conundrum

California's labor laws are thought to be the most complex. A parcel delivery company that misinterpreted the Golden State's work break rules paid dearly for its mistake. The company paid its workers one hour's pay per shift as a premium for working through their legally-mandated rest breaks and meal breaks. More than 30 workers sued, claiming the law entitled them to two hours' premium pay per shift -- one hour's pay for missing the rest break and another hour's pay for missing the meal break. The court agreed. California employers can avoid the two-hour premium per shift by making sure employees receive both a meal break and a rest break for every three-and-one-half hours worked.

Another California quirk involves employees who miss out on work hours because of personal obligations. An employer can let them come in early or stay late to make up missed hours without paying overtime, even if the employee works more than eight hours that day. However, the employer can't encourage an employee who misses work to make the time up in this fashion. The employee has to request the accommodation.

European labor laws

Europe's employee-friendly labor laws come as a pleasant surprise to many U.S. expatriates. Workers in France start accruing days off after 35 hours of work in a week. In industries such as health care, where an employer can't just close up shop after seven hours, workers end up with more time off than they could ever take.

In other member states of the European Union, overtime rules look a lot like the United States' overtime rule, with time-and-a-half kicking in after 40 hours. European law also limits an employee's average work week over a period of time to 48 hours per week.

Collective bargaining agreements

As you might expect, overtime rules for union employees are set by agreement between the employer and the union. Contract provisions in a collective bargaining agreement can even supersede state overtime laws. In California, if a union agreement includes premium pay rates for overtime and establishes other terms related to pay and working conditions, state overtime laws don't apply. Complicated overtime rules mean that an employer with workers in different trades may have to keep track of multiple complicated pay requirements for union and nonunion workers.

What's an employer to do?

It's difficult and time consuming to track employee hours using paper or Excel timesheets when complex rules are involved. Companies can make the transition to automated timesheet software that does the heavy lifting of rules validations and calculations. However, getting there can seem like a daunting task. The ultimate guide to automating payroll time tracking reviews all the steps involved, whether you are simple or complex rules.