By Rob Mason

Should you be paying overtime to your employees? The answer is: it depends.

Sometimes the issue of overtime pay is more of an ethical question than a legal question. There are also questions such as:

1. What are your competition’s policies?

2. Are there state laws that trump federal guidelines?

3. What are the industry standards? Paying “the most one can afford” rather than “the least we can get away with” may help to attract and keep the most qualified employees. Even in low-skill, low-tech positions, a constant turnover is costly and indicative of an undesirable workplace and unhappy employees.

Under the U.S. Fair Labor Standards Act, employers are required to pay overtime to most hourly employees who work more than 40 hours a week for businesses that take in more than $500,000 a year in revenue.

Just because your small business earns less, doesn’t mean you’re off the hook, however. FLSA also applies to any business “engaged in interstate commerce, the production of goods for interstate commerce, or an activity that is closely related and directly essential to the production of such goods.” But it’s not a blanket rule either. FLSA applies only to jobs that involve some form of interstate commerce.

Employers also can exempt certain executive, administrative or professional positions from overtime regulations. The employee must receive a salary or fee of at least $455 per week, with job duties that meet specific requirements.

Defining those responsibilities can be tricky, and the U.S. Department of Labor’s Wage and Hour Division is often called upon to make judgment calls on the applicability of FLSA, as well as state overtime laws.

Fortunately, the WHD’s website,, offers a wealth of detailed information on federal requirements for overtime and other aspects of the FLSA, including minimum wages, family and medical leave and related topics critical to small business. State requirements and contacts are also listed, as well as responses to inquiries to what regulations do/do not apply in certain situations.

An attorney who specializes in human resource issues also will be a good resource for interpreting state and local overtime laws and how they directly affect your small business.

Small business owners should also be aware of areas not covered by FLSA. They include:

Vacation, holiday, severance, or sick pay;

Meal or rest periods, holidays off, or vacations;

Premium pay for weekend or holiday work;

Pay raises or fringe benefits; or

A discharge notice, reason for discharge, or immediate payment of final wages to terminated employees.

Rob Mason is a volunteer SCORE mentor. To learn more about small business employment issues, contact SCORE — which originally stood for Service Corps of Retired Executives — is a nonprofit organization whose volunteers provide free, confidential business mentoring and training workshops to small business owners.