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Overtime in the United States



Overtime is the amount of time someone works beyond normal working hours. Normal hours may be determined in several ways:


 


by custom (what is considered healthy or reasonable by society),


by practices of a given trade or profession,


by legislation,


by agreement between employers and workers or their representatives.


Most nations have overtime laws designed to dissuade or prevent employers from forcing their employees to work excessively long hours. These laws may take into account other considerations than the humanitarian, such as increasing the overall level of employment in the economy. One common approach to regulating overtime is to require employers to pay workers at a higher hourly rate for overtime work. Companies may choose to pay workers higher overtime pay even if not obliged to do so by law, particularly if they believe that they face a backward bending supply curve of labour.


 


Overtime pay rates can cause workers to work longer hours than they would at a flat hourly rate. Overtime laws, attitudes to overtime and hours of work vary greatly from country to country and between different economic sectors.


United States federal law

In the United States, the Fair Labor Standards Act of 1938 establishes a standard work week of 40 hours for certain kinds of workers, and mandates payment for overtime hours to those workers of one and one-half times the worker's normal rate of pay for any time worked above 40 hours. The law creates two broad categories of workers, those that are "exempt" from the regulation and those that are "non-exempt". Classes of workers that are exempt from the regulation include certain types of administrative, professional, and managerial employees. Under the law, employers are not required to pay exempt employees overtime but must do so for non-exempt employees. Out of approximately 120 million American workers, nearly 50 million are exempt from overtime laws (U.S Department of Labor, Wage and Hour Division, 1998). In 2004, the United States was 7th out of 24 OECD countries ranked by number of annual working hours per worker. (See Working time for a complete listing.)


 


On August 23, 2004, President George W. Bush and the Department of Labor proposed changes to regulations which help implement the law. According to one study, the changes could have significant impact on the number of workers covered by overtime laws and exempt several million more workers (Economic Policy Institute). The Bush administration maintained that the practical impact on working Americans would be minimal and would help clarify an outdated regulation. In particular, the rules would allow more companies to offer flextime to their workers in lieu of overtime. In September 2004, both Republican-controlled chambers of Congress voted to block the Labor Department from putting the regulatory changes into effect.

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