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Can employers refuse to pay overtime wages due to company policy?

On Behalf of | Jan 23, 2025 | Employment Law

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Limiting staffing expenses is a top priority for most businesses. Paying for workers’ time is often one of the biggest financial obligations an organization has to fulfill. Worker wages can diminish profit margins or might even push a company into the red.

Particularly at retail and service-based establishments with fluctuating levels of demand, flexible hourly staffing is often the best option available. The leadership within the organization and the managers running individual facilities often strive to limit staffing expenses. They try to keep hourly wages low and often schedule the fewest workers they can. Implementing a no-overtime policy is another way for companies to control staffing costs.

Can employers use a company policy to justify their refusal to pay workers for their overtime?

Companies can prevent overtime but cannot refuse to pay for it

Employers have the right to manage staffing in whatever way they see fit. Companies have every right to limit workers to 35 or fewer hours to avoid overtime wage claims. They can proactively monitor worker shifts and require that they clock out and go home if they are on the cusp of reaching 40 hours for the work week.

It is also legal for a company to have an internal policy where managers or the corporate offices have to approve overtime before scheduling a worker for an extra shift. Companies can prevent overtime work, but they cannot refuse to pay for it after the fact.

If a worker has to stay late or pick up an extra shift because someone else calls in sick, the company cannot deny them overtime wages because of internal employment policies. Regardless of why the worker put in those extra hours, they deserve the overtime pay that they earned by putting in more than 40 hours in a single work week. If the company refuses to pay the worker, then the employee may need to consider pursuing a wage claim.

Overtime wage claims may result in companies providing the pay their workers rightfully earned. Successful litigation may also force a company to reevaluate its policies. Realizing that no-overtime policies do not have priority over federal wage statutes may empower workers to seek the overtime pay they deserve.