Do I have to pay overtime on paid lunch breaks?
Our workweek is 35 hours, plus we pay lunch breaks of 1 hour each day, totaling 40 hours paid each week. If our employees work an hour of overtime, that is, work 36 hours (and get paid for 41 hours), do we have to pay overtime premium for that hour?

No. You can pay them straight time. The Fair Labor Standards Act (FLSA) requires that overtime be paid for each "hour worked" in excess of 40. Since the lunch breaks are not hours worked, they don't have to be counted toward overtime. Therefore, the employee's total hours worked in that week would be only 36. Once the hours worked exceed 40, you would have to start paying overtime.

What about paid break times?
Do we have to count 15-minute break times as time worked for overtime purposes?

Yes, if it is just 15 minutes. The only situation under which a break is not "time worked" under the FLSA is when it meets all of the following criteria:

—The break is more than 20 minutes if it is a rest break or more than 30 minutes if it is a meal break.
—The employee is completely relieved from duty; for example, not required to answer phones or to watch over a machine.
—The employee is free to leave his or her duty post.

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OK, how about smoke breaks?
We are a wellness company. Do we have to pay our smokers for the time they spend on smoke breaks?

Smoke breaks are no different from regular breaks—if they are less than 20 minutes, they are "hours worked." Note: Federal law does not require employers to provide breaks and rest periods, although some state laws do have such requirements.

How do you calculate overtime for salaried nonexempt?
How do you calculate overtime to nonexempt employees who are paid on a salary basis but work more than 40 hours in a week?

In general, overtime for nonexempt employees who are paid on a salary basis rather than hourly is figured by converting the salary to an hourly rate, but the method varies depending on how the workweek is structured. For example:

• Salaried with a fixed 40-hour week. The overtime rate is one and one-half times the rate per hour (weekly salary divided by 40) for all hours over 40 worked per week.
  
• Salaried with a fixed week of fewer than 40 hours. The overtime rate is one and one-half times the rate per hour (weekly salary divided by the number of hours that the salary is intended to compensate) for all hours over 40 worked per week. For example, if an employee is paid a weekly salary of $350 for a 35-hour week, the rate per hour is $10. The employee must be paid $10 for hours 36 to 40 worked in a week and $15 for any hours in excess of 40 worked in a week.

The employer and employee could have an agreement that the salary paid represents compensation for all hours up to 40 per week. In that case, no additional compensation would be owed for hours 36 to 40, and the overtime rate would be the same as for an employee with a fixed 40-hour week.

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• Salaried with an irregular workweek. Employees who are paid a salary and whose hours vary from week to week receive an overtime premium calculated as follows: For each hour worked over 40, add one-half the rate per hour for that week. The rate per hour is the weekly salary divided by the actual number of hours worked in the workweek. For example, a $400-per-week employee earns $8 per hour in a 50-hour week. Half this amount, $4, is the overtime premium per hour. With 10 hours of overtime, the employee receives $40 in overtime pay.
  
• Monthly and semimonthly salaries. For these employees, overtime is computed by converting their salary to a weekly rate.

In tomorrow's Advisor: Do bonuses count? Do I need a time clock? Plus, an introduction to a wage and hour audit system that will help you find problems before the feds do.