FLSA Section 7: Overtime Rules, Exemptions, and Comp Time

Section 7 of the Fair Labor Standards Act sets the federal overtime requirements: employers must pay non-exempt employees at least one and a half times their regular rate for every hour worked beyond 40 in a single workweek.¹ The statute, codified at 29 U.S.C. § 207, also lays out how the regular rate is calculated, when public employers can offer compensatory time instead of cash, and how the 40-hour rule bends for police officers and firefighters. It does not cap how many hours a person can work. It just makes hours above 40 more expensive.

The 40-Hour Rule and the Workweek

The workweek is the unit that matters. A workweek is any fixed, recurring period of seven consecutive days. It does not have to run Monday through Friday, or start at midnight. An employer can set it to begin Wednesday at 6 a.m. if that suits the operation. Once fixed, each workweek stands alone.

Employers cannot average hours across two or more weeks to avoid overtime. Fifty hours one week and thirty the next produces ten hours of overtime for the first week, not zero on a two-week average.² This is a frequent violation, especially where pay runs biweekly and the payroll math quietly blends the numbers.

Federal law has no daily overtime threshold. A handful of states require overtime after eight hours in a single day regardless of the weekly total, but that protection depends entirely on state law.

Who Section 7 Covers

Section 7 reaches employees through two channels. Enterprise coverage applies to businesses with at least $500,000 in annual gross sales or business volume, and to hospitals, schools, and government agencies regardless of revenue.³

Individual coverage picks up employees whose work touches interstate commerce even when the employer falls below the revenue threshold. That includes handling credit card transactions, emailing contacts in other states, receiving shipped goods, and cleaning buildings where interstate goods are produced.⁴ Individual coverage sweeps in most of the American workforce, including domestic service workers such as housekeepers, full-time babysitters, and cooks.

Calculating the Regular Rate

The 1.5 multiplier attaches to the employee’s “regular rate,” not the base hourly wage. The regular rate includes all pay for work: base wages, non-discretionary bonuses, shift differentials, and commissions.¹ A non-discretionary bonus is one the employee expects because it is tied to production, attendance, or another measurable standard. If a company promises $100 for hitting a weekly quota, that $100 folds into the regular rate before overtime is calculated.

Some payments are excluded by statute: genuine gifts such as a voluntary holiday bonus with no set formula, vacation and sick pay, employer contributions to retirement or health plans, and premium pay already credited for weekend or holiday work.¹ The dividing line matters. A “bonus” that is really a contractual obligation based on hours or output is not discretionary and must be included.

The math looks like this. Suppose an employee earns $20 per hour, works 50 hours in a week, and earns a $100 non-discretionary production bonus. The regular rate is total straight-time pay divided by total hours: ($20 × 50 + $100) ÷ 50 = $22. Overtime pay for the ten extra hours is $22 × 1.5 = $33 per hour, for $330 in overtime wages. An employer who multiplies the $20 base by 1.5 and ignores the bonus shortchanges the worker by $30 that week.

Tipped Employees

Tipped workers add a wrinkle. The FLSA lets employers pay a direct cash wage as low as $2.13 per hour, claiming a tip credit of up to $5.12 per hour to reach the $7.25 federal minimum wage.⁵ The regular rate for overtime is the full minimum wage (cash wages plus tip credit), not the $2.13.

To find the overtime cash wage, multiply the regular rate by 1.5 and subtract the tip credit. At a $7.25 regular rate, overtime is $7.25 × 1.5 = $10.88, minus the $5.12 tip credit, leaving a direct cash wage of $5.76 per overtime hour.⁶ The tip credit claimed during overtime hours cannot exceed the credit claimed during straight time.

What Counts as Hours Worked

The 40-hour count depends on which hours count in the first place, and this is where most overtime disputes begin.

An ordinary commute from home to a fixed workplace is not compensable. Travel between job sites during the workday is. A special one-day assignment to another city is compensable travel, though the employer can deduct time the employee would normally spend commuting to the regular site.⁷ For overnight travel, any time falling within regular working hours counts as work time, even on days the employee would not normally work.

On-call time depends on how restricted the employee is. Required to remain on the employer’s premises? That is working. Simply required to leave a phone number and otherwise free? Generally not compensable. The more the employer limits how far the employee can travel, how quickly they must respond, or what they can do, the more likely on-call time must be paid.⁷

Employers may round clock-in and clock-out times to the nearest five minutes or quarter hour, provided the rounding does not systematically shortchange employees over time. Very small, irregular bits of time can be disregarded under the de minimis rule when they are genuinely impractical to track. That rule does not allow employers to ignore regularly occurring pre-shift or post-shift duties just because each instance is short.⁸

Who Is Exempt

Not every worker gets overtime protection. The most widely used exemptions are the “white-collar” categories for executive, administrative, and professional employees. To qualify, a worker must pass both a salary test and a duties test. Job titles alone mean nothing.⁹

The Salary Threshold

The current minimum salary for the white-collar exemptions is $684 per week, or $35,568 annually. A higher $107,432 total annual compensation threshold applies to the highly compensated employee exemption.¹⁰ The Department of Labor tried to raise these thresholds in 2024, but a federal court vacated that rule in November 2024, so the 2019 levels remain in effect.

The Duties Tests

Meeting the salary test is necessary but not sufficient. Each exemption has its own duties requirements.

Executive: primary duty must be managing the business or a recognized department, the employee must regularly direct at least two full-time employees, and they must have genuine authority over hiring and firing or their recommendations on those decisions must carry real weight.⁹
Administrative: primary duty must involve office or non-manual work directly related to running the business or its customers’ operations, and the work must require independent judgment on significant matters rather than routine procedure-following. Human resources, finance, marketing, and compliance roles often fit.¹¹
Professional: employee must perform work requiring advanced knowledge in a field such as law, medicine, engineering, accounting, or the sciences, and that knowledge must typically be acquired through prolonged, specialized education rather than on-the-job training.¹²

Commissioned Retail and Service Employees

Section 7(i) exempts certain commissioned employees of retail or service businesses. Two conditions must be met: the employee’s regular rate must exceed one and a half times the applicable minimum wage, and more than half of their total earnings over a representative period of at least one month must come from commissions.¹ At the current $7.25 federal minimum wage, the regular rate must exceed $10.88 per hour. If either condition fails in a given period, overtime must be paid.

Compensatory Time for Public Employees

Private-sector employers must pay overtime in cash. Section 7(o) gives state and local government agencies an alternative: compensatory time off at the same 1.5 ratio, so one overtime hour earns 1.5 hours of comp time.¹³

The arrangement is only legal when an agreement exists before the work is performed. For union employees, the collective bargaining agreement covers it. For non-union employees, the agreement can be an individual understanding or a condition of hire established at the start.¹ An employer cannot decide after the fact that overtime will be paid in time off instead of cash.

Accrual caps: public safety, emergency response, and seasonal workers can bank up to 480 hours of comp time. All other public employees are capped at 240 hours.¹³ Once an employee hits the cap, the agency must pay cash for any additional overtime.

Work Periods for Police and Firefighters

Police officers and firefighters often work 24-hour shifts, rotating schedules, and multi-day tours that do not fit a seven-day week. Section 7(k) lets public agencies adopt a “work period” of 7 to 28 consecutive days for law enforcement and fire protection employees.¹⁴

In a 28-day work period, overtime begins after 171 hours for law enforcement and 212 hours for fire protection personnel.¹⁴ Shorter work periods scale the threshold proportionally, giving agencies scheduling flexibility without removing overtime protection.

Nursing Mother Break Time

Workplace protections for employees expressing breast milk once lived in Section 7 but were moved and expanded by the PUMP for Nursing Mothers Act, passed in December 2022. They are now codified at 29 U.S.C. § 218d, and coverage extends to categories previously excluded, including teachers, nurses, agricultural workers, and drivers.¹⁵¹⁶

Employers must provide reasonable break time whenever the need arises, for one year after the child’s birth, and a private space shielded from view and free from intrusion. A bathroom does not qualify.¹⁶ If the employee is not fully relieved from duties during the break, that time counts as hours worked and must be paid. If they are completely relieved, the break may be unpaid unless policy or contract says otherwise.

Employers with fewer than 50 employees can claim an undue hardship exemption, but they bear the burden of proof, and inconvenience or modest cost is unlikely to qualify. Before suing over an inadequate pumping space, an employee must notify the employer and give ten business days to fix the problem, unless the employer has already fired the employee for requesting accommodations or openly refused to comply.¹⁷ Retaliation for exercising pumping rights or filing a related complaint is itself a violation, and most courts have held that internal complaints to the employer, not just formal filings with the Department of Labor, are protected.¹⁸

Penalties, Deadlines, and Records

An employer that violates Section 7’s overtime rules owes the unpaid overtime plus an equal amount in liquidated damages, effectively doubling the bill.¹⁹ The same liquidated damages provision reaches PUMP Act violations. Employees can pursue claims through the Department of Labor or file a private lawsuit.

The statute of limitations is two years from the date of the violation. If the violation was willful, meaning the employer knew it was breaking the law or acted with reckless disregard, the window extends to three years.²⁰ The Department of Labor can also impose civil money penalties for repeated or willful overtime violations, currently up to $2,515 per violation and adjusted annually for inflation.²¹

Federal regulations require employers to keep detailed records for every non-exempt employee: full name, home address, hours worked each day and each week, regular rate of pay for any overtime week, straight-time earnings, overtime premium pay, all additions and deductions from wages, total wages paid, and the pay period covered.²² Missing or sloppy records make it harder for an employer to defend an overtime claim, because courts often resolve ambiguities against the party that failed to keep proper records.

1
Office of the Law Revision Counsel. 29 U.S. Code 207 – Maximum Hours
2
eCFR. 29 CFR Part 778 – Overtime Compensation
3
U.S. Department of Labor. Fact Sheet #27: New Businesses Under the Fair Labor Standards Act
4
U.S. Department of Labor. Fact Sheet #14: Coverage Under the Fair Labor Standards Act (FLSA)
5
U.S. Department of Labor. Fact Sheet #15: Tipped Employees Under the Fair Labor Standards Act
6
U.S. Department of Labor. FLSA Overtime Calculator Advisor
7
U.S. Department of Labor. Fact Sheet #22: Hours Worked Under the Fair Labor Standards Act
8
U.S. Department of Labor. FLSA Hours Worked Advisor
9
U.S. Department of Labor. Fact Sheet #17A: Exemption for Executive, Administrative, Professional, Computer and Outside Sales Employees Under the FLSA
10
U.S. Department of Labor. Earnings Thresholds for the Executive, Administrative, and Professional Exemption
11
U.S. Department of Labor. Fact Sheet #17C: Exemption for Administrative Employees Under the FLSA
12
U.S. Department of Labor. Fact Sheet #17D: Exemption for Professional Employees Under the FLSA
13
eCFR. 29 CFR Part 553 Subpart A – Compensatory Time and Compensatory Time Off
14
U.S. Department of Labor. Fact Sheet #8: Law Enforcement and Fire Protection Employees Under the Fair Labor Standards Act
15
U.S. Department of Labor. FLSA Protections to Pump at Work
16
Office of the Law Revision Counsel. 29 U.S. Code 218d – Breastfeeding Accommodations in the Workplace
17
GovInfo. 29 U.S. Code 218d – Breastfeeding Accommodations in the Workplace
18
U.S. Department of Labor. Fact Sheet #73: FLSA Protections for Employees to Pump Breast Milk at Work
19
Office of the Law Revision Counsel. 29 U.S. Code 216 – Penalties
20
Office of the Law Revision Counsel. 29 U.S. Code 255 – Statute of Limitations
21
U.S. Department of Labor. Civil Money Penalty Inflation Adjustments
22
eCFR. 29 CFR 516.2 – Employees Subject to Minimum Wage or Minimum Wage and Overtime