Paying your employees should be pretty straightforward. However, understanding overtime laws can be tricky and stressful, especially for small business owners. Are you a bit confused about Maine overtime laws? You’re not alone. Many business owners share your frustration, trying to navigate these complex rules to ensure fair compensation for their workers.
In this article, we’ll break down the essentials of Maine’s overtime laws, making it easier for you to grasp and apply them. At Paper Trails, we are dedicated to helping small businesses overcome their payroll and HR challenges. Over the years, we have encountered many business owners who struggle to navigate overtime challenges properly and that is why we have put together this article. By the end of this read, you’ll have a clear understanding of how Maine’s overtime laws work, who qualifies for overtime, and how to handle exemptions and payments. Let’s dive in and simplify this topic together.
What is overtime pay?
Overtime pay is additional compensation for employees who work beyond the standard 40 hours in a single workweek. According to the Fair Labor Standards Act, most hourly employees are entitled to this extra pay, which is calculated at one and a half times their regular hourly wage. This ensures that employees are fairly compensated for their extra effort and time.
So, how does this work in practice? Let’s look at an example. Say an employee earns $20 per hour. If they work more than 40 hours in one week, their overtime pay rate would be $30 per hour ($20 x 1.5). This means that for every hour worked beyond the standard 40 hours, the employee earns an extra $10 per hour. If the employee works 50 hours in a week, they would receive $20 per hour for 40 hours ($800) and $30 per hour for 10 hours ($300) for a total of $1100.
This system is designed to protect workers from being overworked and underpaid. By ensuring that employees receive higher pay for overtime hours, overtime laws incentivize employers to manage work hours effectively and respect their employees’ time. It also provides employees with a financial reward for putting in extra hours, which can be particularly beneficial during busy periods or when deadlines are approaching.
Maine overtime pay
Maine overtime laws stipulate that non-exempt employees must receive overtime pay for hours worked over 40 in a workweek. Employers have the right to allow or deny overtime, but if overtime is worked, it must be paid accordingly. Unlike some states, Maine does not have a daily overtime limit, meaning overtime is only calculated on a weekly basis.
Under Maine overtime laws, the minimum wage for overtime pay is set at $21.23 per hour, which is one and a half times the regular minimum wage. For 2024, the minimum wage in Maine is $14.15 per hour ($14.15 x 1.5 = $21.23 per hour). The cities of Portland and Rockland have a minimum wage of $15 per hour, meaning the overtime pay minimum in those cities is $22.50 per hour for 2024 ($15 x 1.5 = $22.50).
Blended overtime rules
Calculating standard overtime pay is straightforward, but things get trickier when dealing with employees working multiple roles at varying pay rates. This scenario is known as blended overtime and is a federal requirement that impacts Maine businesses. Blended overtime refers to the compensation an employee, engaged in multiple roles with distinct pay rates, receives for working more than 40 hours within a 7-day period.
There are many examples of an employee who would work at multiple pay rates. A restaurant employee may work as a hostess one shift at minimum wage, and then a server the next day and fall under the FICA Tip Credit rules and make a lower wage. Another example would be a construction worker having different responsibilities at different jobsites, resulting in different pay rates for each. Should these two employees work overtime hours, their overtime pay would be calculated using the blended overtime formula.
It is also important to note that any compulsory payments are considered “regular pay” and must be included in the blended overtime calculation. Compulsory payments are items like commissions, piece work and service charges. These types of items are considered to be part of an employees’ regular pay and are included when calculating blended overtime.
Exemptions from overtime in Maine
While non-exempt employees must be paid overtime pay for hours worked over 40 in a given 7 day period, there are certain employees that are considered exempt from overtime under overtime laws. To be considered exempt, employees must meet both salary and duties tests:
- Salary Test: As of January 1, 2024, the minimum salary requirement in Maine is $816.35 per week. *As of July 1st, a federal law is set to increase this amount to $844 per week. This law will increase the threshold again on January 1st, 2025 to $1,128 per week.*
- Duties Test: The job duties must align with specific criteria for executive, administrative, or professional roles.
Understanding EAP exemptions
Certain criteria related to their job duties are known as EAP exemptions. EAP stands for Executive, Administrative, and Professional. These are categories under the Fair Labor Standards Act (FLSA) that define specific types of exempt employees. These roles typically require a higher level of expertise or responsibility. Let’s look at each of the EAP exemptions.
Executive Exemption
- Primary Duty: The primary duty of an executive employee must be managing the business or a certain department.
- Management Role: This includes the authority to direct the work of other employees and to make decisions on hiring and firing.
- Regular Supervision: An executive must regularly supervise at least two or more full-time employees.
Administrative Exemption
- Primary Duty: The primary duty is the performance of office or non-manual work directly related to management or general business operations.
- Discretion and Independent Judgment: The employee has the authority to make important decisions without significant oversight.
Professional Exemption
- Primary Duty: The primary duty must be work requiring advanced knowledge, predominantly intellectual in character and which includes work requiring the consistent exercise of discretion and judgment.
- Advanced Knowledge: This must be in a field of science or learning customarily acquired by a prolonged course. This category includes roles such as lawyers, doctors, architects, engineers, and teachers.
Maine overtime laws for tipped employees
Understanding how overtime pay works for tipped employees is crucial, especially in Maine where service industry jobs are prevalent. Tipped employees, such as servers, bartenders, and other hospitality workers, earn a base hourly wage plus tips from customers. However, when it comes to overtime, Maine overtime laws ensure that these employees are fairly compensated, just like their non-tipped counterparts.
Overtime pay calculation for tipped employees
In Maine, tipped employees must receive overtime pay at a rate of one and a half times the full minimum wage, not the reduced tipped wage. As of 2024, the minimum wage in Maine is $14.15 per hour. Therefore, the overtime rate for tipped employees is calculated as follows:
- Minimum wage: $14.15 per hour
- Overtime rate: 1.5 times $14.15, which equals $21.23 per hour
Even if an employer applies the FICA tip credit, which allows them to pay tipped employees a base wage lower than the minimum wage (as long as tips make up the difference), the overtime pay calculation is still based on the full minimum wage.
For example, if a server earns $7.08 per hour in base wages (the tipped minimum wage) and typically makes enough tips to bring their total earnings up to or above the minimum wage, their overtime pay for hours worked over 40 in a week would still be $21.23 per hour. The employer can then take the tip credit after the overtime is calculated at full minimum wage, however an employer may not take a larger tip credit for an overtime hour than for a straight time hour.
Employers must keep accurate records of all hours worked by tipped employees, including overtime. This includes tracking both the base wage paid and the tips received to ensure that the total compensation meets or exceeds the minimum wage requirements. Failure to comply with these regulations can result in penalties and back wages owed to employees.
Maine overtime laws for common ownership
When it comes to Maine overtime laws, businesses with common ownership are often treated as a single employer for overtime calculations. For employees working at different sites or businesses under the same ownership, Maine overtime laws require that all hours worked be aggregated. This rule ensures that employees are fairly compensated for all their labor, regardless of where or for which branch they perform their duties.
For example, imagine you work 25 hours at one restaurant and 20 hours at another restaurant, both owned by the same company. Even though you didn’t exceed 40 hours at either location individually, your total combined hours worked for the week is 45 hours. According to Maine overtime laws, you are entitled to overtime pay for the 5 hours worked beyond the standard 40-hour workweek.
Employers with common ownership must accurately track and combine employees’ hours worked across all their businesses. This record-keeping is essential for ensuring compliance with Maine overtime laws and for preventing disputes over unpaid overtime wages. Employers should maintain clear communication with their employees about how hours will be tracked and combined for overtime purposes. Employers who fail to properly calculate and pay overtime wages risk facing legal consequences, including back pay, fines, and penalties. It’s crucial for businesses to understand their obligations under the law and to ensure that their payroll practices align with these requirements.
Conclusion
Understanding Maine’s overtime laws doesn’t have to be overwhelming. By knowing who qualifies for overtime, how to calculate it, and understanding exemptions, you can ensure fair compensation for your employees. At Paper Trails, we are here to help small businesses navigate these complexities and make payroll and HR management as smooth as possible. Stay informed, and don’t hesitate to seek our help if you need it.