By Quenda Behler
I'm going to go out on a limb and say you're running behind on
your work schedule. How do I know? Because of Murphy's Law:
Anything that can go wrong will.
So you're trying to figure out how you're going to manage all
these extra, unbudgeted, labor hours. One question is, Do you
have to pay overtime? Also, is there some way you could spread
those labor costs out instead of paying them all at once?
State and Federal
Your state may require you to pay overtime. In Michigan,
employees who are paid on an hourly basis must receive time and
half for hours worked over 40 hours a week. (There are other
formulas for employees who work odd shifts, such as three days
a week, but we're not concerned about those in this
Most other states have similar fair labor laws regulating both
minimum wages and employee overtime. A few states don't. But
even in those states, employers may have to pay overtime if
they're working on a federal project, such as a new roof for
the local post office, or maybe a project that's being built
with federal dollars -- a federal economic opportunity grant,
The federal standards are not important here in Michigan,
because our wage and overtime laws are mostly more stringent
than the federal standards. If you're subject to both, you must
pay the higher rate. But the federal requirements could be very
important in states with weaker employee protection laws, or
none at all, because in those states, the federal standards
could make your labor costs higher.
Except for what
I've mentioned, and a couple of other franchising exceptions,
however, construction work as a general rule is not covered by
the federal laws, because it rarely involves doing business
across state lines.
Even if you are covered by state or federal overtime laws, as
a general rule, salaried employees are not entitled to time and
a half overtime pay. Salaried workers usually include clerical
staff, estimators, and supervisory personnel. They are paid a
certain, specific amount of money each pay period, whether they
work 35 hours or 65 hours a week.
Of course, you don't have to pay those people a flat salary.
You can pay them by the hour if you choose to, but if you do
and you're in a state with overtime laws or working on a
federal project, those people will be entitled to overtime pay
when they work extra hours. It's not the job title but the pay
structure that makes the difference.
Nor, of course, do you have to pay overtime to independent
contractors. They are not your employees, salaried or
I'm sure most of you know that the solution to your overtime
problems is not simply to reclassify everybody on your payroll
as an independent contractor. Tempting though the thought might
be at times, the federal and state regulators have specific
standards to determine who is and who is not an independent
contractor. They also have some nasty penalties for
You may think you see another solution. Say hunting season is
coming up, and half your crew will call in sick that week
anyway. The other half doesn't bother lying to you. Can you say
to them, "Okay, instead of paying you overtime, I'm going to
let you bank your overtime as paid hours off, so that when you
go hunting, you can still get paid"?
In Michigan, you can offer that option and they don't even
have to go hunting; they can do whatever they want with their
comp time. What you cannot do in Michigan, or perhaps anywhere,
is force your employees to take compensation time instead of
extra pay. If they're entitled to overtime pay and don't want
to take comp time instead, they don't have to. They can claim
the overtime pay.
But is there any advantage to you in offering comp time? Yes,
sometimes there is. Substituting comp time for immediate
overtime allows you to spread out your labor costs. When cash
flow gets tight, you may be able to get out of trouble by
delaying some expenses.
If you do get into a comp time arrangement, most state laws
require you to report those accumulated compensation hours in
the same way you report wages and withholding.
Written statement. In
Michigan, not only can you not require an employee to take comp
time instead of overtime pay, you also must get written consent
from the employee saying that he or she chooses to take the
comp time instead of the extra pay.
More than the law requires.
Remember that I'm talking about what the law requires you to
do. You may have a different bargaining arrangement with your
employees -- you can always agree to give them more than what
the law requires (or your employees can force you to give them
more). You cannot, however, make an agreement with your
employees that gives them less than the law allows.Quenda Behler Storyhas practiced and taught law for over 25
years and is the author of
Plain-English Legal Guide