Quick answer: Under the federal Fair Labor Standards Act (FLSA), non-exempt employees must be paid at least 1.5 times their regular rate for hours worked over 40 in a workweek, and employers must keep accurate records of hours worked and wages paid. Many states add stricter rules, such as daily overtime, meal and rest breaks, or predictive scheduling. Accurate, verified time records are the foundation of compliance.
This article is general information, not legal advice. Employment law varies by state and city; confirm requirements with your state labor department or an employment attorney.
Key federal concepts
Exempt vs. non-exempt
Most hourly retail and store employees are non-exempt, meaning they are entitled to overtime. Exemption depends on salary level and job duties, not just the job title.
The workweek
A workweek is a fixed, recurring period of 168 hours (seven consecutive 24-hour periods) chosen by the employer. Overtime is calculated per workweek; you generally can't average hours across two weeks.
Overtime rate
Hours over 40 in a workweek are paid at at least 1.5× the regular rate. The regular rate can include certain bonuses and shift differentials.
Hours worked
Includes time employees are required or allowed to work, such as opening tasks before clocking in, or finishing a closing count after the shift ends. "Off-the-clock" work must be paid.
Recordkeeping (federal)
Employers must keep records such as:
- employee identification details;
- the workweek's start time and day;
- hours worked each day and each workweek;
- regular rate, straight-time and overtime earnings;
- deductions and additions;
- pay dates and pay periods.
Payroll records generally must be kept for at least three years, and supporting time records for two years.
Breaks
Federal law doesn't require meal or rest breaks, but many states do. Short breaks (typically 5–20 minutes), when given, are usually paid time under federal rules.
Rounding
Rounding clock times is allowed federally only if it is neutral over time, meaning it doesn't consistently favor the employer. Many businesses simply record exact times to avoid disputes.
State and local rules to check
- Daily overtime (some states require overtime after 8 hours in a day).
- Meal and rest break requirements.
- Predictive scheduling (advance notice, premium pay for changes) in certain cities and states.
- Pay frequency and final paycheck timing.
- Minimum wage, which is often higher than federal.
How good systems help
- Verified hours reduce disputes and off-the-clock risk.
- Automatic overtime calculation per workweek.
- Break tracking with alerts.
- Complete records stored and exportable.
- Audit trail of every change to hours or pay.
Frequently asked questions
Is overtime calculated per day or per week?
Federally, per workweek (over 40 hours). Some states also require daily overtime.
Can employees agree to skip overtime pay?
No. Non-exempt employees can't waive their right to overtime under the FLSA.
Do I need to pay for opening or closing tasks done off the clock?
Yes. Required work must be recorded and paid.
How long must I keep time records?
Federally, payroll records generally for three years and time cards for two. Check your state, which may require longer.
Key takeaways
- Non-exempt employees get 1.5× pay over 40 hours per workweek (federal).
- Keep accurate, complete records of hours and pay.
- Check state and local rules for daily overtime, breaks and scheduling.
- Verified attendance and automatic calculations reduce risk.
Next step: Digital EYE keeps verified time records and calculates pay per period with a full audit trail. Learn more.