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Overtime is the amount of time someone works beyond normal working hours; these 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, or by agreement between employers and workers or their representatives. Most nations have overtime laws designed to prevent and/or dissuade employers from working their employees excessively. Such laws may take into account other considerations, such as increasing the overall level of employment in the economy. One common approach to regulating overtime is to require employers to pay a higher wage to their workers for any overtime worked. In certain cases, a company may choose to pay its workers a higher wage for overtime worked even without a law, particularly if it believes that it faces a backward bending supply curve of labour. In that situation, overtime wages can cause workers to work greater hours than they would under any flat wage rate. Overtime laws vary greatly from country to country, as do attitudes to overtime and hours of work in different economic sectors.
U.S. Overtime 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). As a result, Americans rank near the top for the average number of hours worked per year (1,979) compared to other modern capitalist nations. (International Labour Organization, Table 6b).
The overtime laws were overhauled by President George W. Bush and the Department of Labor, on August 23 2004. The changes to the law, pushed for by large retailers and other business interests, were controversial. 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 impact would be minimal and would help clarify an out-dated 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 overtime law changes into effect.
- U.S Department of Labor, Wage and Hour Division, Minimum Wage and Overtime Hours Under the Fair Labor Standards Atc: 1998 Report to the Congress Required by Section 4(d)(1) of the Fair Labor Standards Act, tab. 2 at 14 (1998).
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