Paying workers for overtime can become very costly for a business. Many organizations have no-overtime policies or require pre-approval before workers put in more than 40 hours. Others pay workers salaries so that their wage costs remain static even when overtime is necessary.
The ability to limit overtime pay and control wage expenses is crucial for an organization’s long-term financial stability. However, some policies can lead to frustration among workers. In some cases, workers may feel like an employer violated their rights, and sometimes, those workers may have grounds to pursue a lawsuit.
Many wage and hour lawsuits arise specifically because a company does not pay workers for overtime. Scenarios that involve overtime wage lawsuits often involve one of the three concerns noted below.
A no-overtime policy
Technically, employers have every right to limit how many hours they schedule individual workers. Many businesses are very strict about preventing workers from putting in more than 40 hours so that they can avoid overtime wage rules. Companies can control scheduling and send workers home so that they don’t put in overtime. However, they typically cannot deny workers pay for extra hours after they have already worked that time.
Non-exempt worker salaries
Many employers avoid overtime wage obligations by hiring employees on a salary basis. Salaried employees are often exempt from overtime wage rules, but that is not always the case. If the salary is too low, the worker may still have a right to overtime wages despite receiving a salary. Currently, any worker paid less than $43,888 annually has the right to overtime pay if they put in extra hours. That minimum salary increases as of January 1st, 2025 to $58,656.
Demanding work off the clock
Many companies try to control costs by focusing on efficiency and limiting how long their workers are on the clock. Some companies take that practice too far by training workers to do prep work or cleaning before they begin a shift or after they clock out. When companies require that workers perform routine job tasks without compensation, those workers may eventually attempt to pursue a wage claim. If the total number of hours worked goes over 40 per week after factoring in that unpaid labor, the wage claim they bring may result in overtime pay.
Companies may need to review and update certain internal employment policies to protect against expensive wage claims. Maintaining legal compliance with all wage regulations can help insulate employers against lawsuits that can eat into their profits and damage their reputations.