What Is Chinese Overtime?

Despite its outdated terminology, "Chinese overtime" is still at times used to describe the fixed salary for those who work a fluctuating workweek. It also applies to work situations involving piece-rate pay and day rates. Still, its primary purpose is to ensure employees who work extra hours when receiving a fixed salary are compensated fairly for their additional labor.

Typically, employees who receive a fixed salary will receive additional pay that equals half of their normal rate for hours worked over forty in a workweek. The Fair Labor Standard Act states explicitly that employees covered by this law must be paid overtime when working more than forty hours in their week and that the pay rate cannot be less than time and a half of their normal wages.

More answers to commonly asked questions

Typically, when an employee has varying work hours from week to week but receives a set salary, their employer may use a fixed salary for fluctuating workweeks to determine the amount of overtime they receive. This is "Chinese overtime" and generally favors the employer's budget, but there are specific protocols that go with this method of overtime compensation that must be met to qualify:

  • Must work variable hours throughout your workweek
  • Must receive a fixed salary for those hours worked regardless of how many hours on the job that pay period
  • Salary must be enough that should they work overtime, the sliding scale applied to those extra work hours are never paid at less than minimum wage based on their regular rate.

To determine your regular pay rate as a salaried employee, you divide your fixed salary amount by the number of hours worked in that pay period. It can't be less than $7.25 an hour by law. This pay structure is frequently seen in the United States Postal Service for rural route carriers. Regardless if they finish their route in six hours or fifteen, they get the same fixed amount of pay until exceeding the number of work hours allowed in their salary agreement. 

But, unlike non-salaried employees, those who receive a fixed salary need only be compensated at a half-time rate instead of time and a half for their overtime hours—confused yet?

You may be noticing a blatant advantage to your employer in the math behind this type of overtime compensation. That's because it does. When fixed salary employees work extra hours, their regular rate essentially gets reduced, giving their company a break on the cost of their wages. This is a primary example of a sliding scale over time, which means you get paid less for every extra hour you work. 

By purposely making your workweek longer, your company is essentially paying less to get their work completed. Even if an employer doesn't have enough work to fill up your workweek to forty hours, they still must pay your regular salary, which raises your standard rate.

Generally, working a schedule where you only gain or lose a few hours each week doesn't fall under Chinese Overtime rules. But, FLSA regulations aren't specific about how much your hours have to fluctuate each workweek to be a variable workweek. In reality, it doesn't even have to be a day-to-day or week-to-week variability either, but it could just be a busy season scenario compared to other times of the year when workflow is slower. 

Further, laws don't limit how many hours you can work in a workweek or what days you can perform overtime duties. However, any work you've done to receive a variable overtime rate must fall within a consecutive 7-day 24-hour period (168 hours). 

It's important to understand that the phrase "Chinese Overtime" is slang. Because it's a fixed salary overtime policy that typically favors employers, it may have been created to allude to the principles of a communist government. The use of this term was usually intended as an insult towards a company using unfair pay practices of its salaried employees. The reality is that it has no basis in fact when compared to how Chinese employment laws work, making it an outdated pejorative. 

Ironically, compared to U.S. employers, Chinese companies and the labor laws governing them are employee-friendly compared to employment policies used in the United States.

When calculating overtime pay, Chinese labor laws have stringent regulations in place. Some policies include that any hours worked over eight in a single workday should be paid at time and a half of their regular rate. For some employees, they receive double time working the weekend and triple when working on national holidays.

Further, employees are not to be working more than 36 hours extra within any given month or be required to be on the job for more than three hours past their normal schedule in a day. While this may sound generous, much like in the United States, there are some loopholes that employers can take advantage of. For instance, employment agreements can modify these restrictions, but employees must consent, just like in the U.S.

If you are an employee being taken advantage of by your employer through Chinese Overtime tactics, you have every right to be disgruntled and are not alone! There are numerous lawsuits throughout the United States right now where the legality of this practice is being challenged. Big names like The Pepsi Beverages Company, for example, are currently litigating cases related to how they've incorrectly paid their fixed-salaried employees who have worked overtime hours. 

The soda manufacturer is still dealing with a class-action lawsuit in Massachusetts alleging it failed to follow fair overtime compensation protocols in 2011 and 2012. The complainant, in this case, claims that PepsiCo wrongly adjusted his and other employees' overtime pay at the half-time rate instead of at time and a half of their regular rate. It was also made known in the case that the plaintiff in this class-action wasn't even a salaried employee! 

According to the complainant, non-salaried employees routinely had their pay arbitrarily adjusted based on the type of circumstances leading to their overtime hours worked. This included reduced holiday pay, bonuses when working extra days, and commissions paid out for achieving agreed-upon milestones on the job. 

Even Coca-Cola has found itself on the receiving end of overtime pay controversy and lawsuits because it exploits the hourly requirements behind fluctuating workweek overtime pay. The company is currently accused of purposely increasing delivery routes so they cannot be completed within a standard 40-hour workweek. This allows them to force their fixed-salary delivery drivers into a sliding scale overtime situation. They go from a regular rate of $30 to $21 because of the additional hours they must put in to finish their route.

Another type of overtime that employers will try to exploit is weighted overtime and often works into a fluctuating workweek schedule. It involves employees who may need to perform different jobs within the same company. For example, at Amazon, warehouse employees may work on the dock, unloading inbound trucks. Later, they move to pallet wrapping or building. These different jobs may have different rates of pay.

How do they pay you overtime in this situation? The Department of Labor requires employers using weighted overtime to pay qualifying employees at their regular rate, which would be the average of all the rates of pay you worked under that week. 

When working overtime in this type of work environment, there are four steps in calculating this blend of extra hours:

  • Determine how many hours you worked under each rate of pay
  • Find the average of those rates
  • Determine the amount of total weighted overtime worked that period
  • Take those hours times the average rate of pay

In certain situations, yes. To pay an employee under Chinese Overtime rules, the following criteria must be met:

  • Employees must regularly work a variable hour schedule 
  • Employees must have a regular pay rate for calculating their overtime wages 
  • Their half-time rate must be within federal minimum wage requirements
  • The employer and employee must also understand that the fixed-salary paid when hired covers all work hours and weeks worked, even when below a standard 40 hours. 

Employers who fail to apply these stipulations may be liable for violating federal overtime laws and owe damages to their employees. This is why workers should speak with a knowledgeable employment law attorney like those at Morgan & Morgan if they believe their company is not paying them fairly. FLSA law can be highly complicated, and knowing what rights you have in your employment situation may not be clear. Our legal team can assess your situation and determine if legal action is necessary to get the pay you deserve for your hard work.

It may be no surprise that employers who rely on fluctuating workweek schedules for their fixed salary employees frequently make mistakes when calculating overtime pay. In addition, there are instances where an employer didn't even pay their workers their fixed salary at all because they would apply a fluctuating workweek model to situations that didn't qualify for this compensation approach. 

Worse, employees have also been subjected to Chinese Overtime standards for their commission earnings, shift pay differentials, and even holiday pay! These are not supposed to be subject to fluctuating workweek standards, but some companies try to get away with it to save money by claiming these wages are a form of fixed salary.

Another pitfall that often occurs when employers use this type of overtime arrangement is not communicating that this model will be used when hiring an employee on a fixed salary. The law requires both parties (employer and worker) to clearly understand a company's fluctuating overtime policies. Failing to do so is problematic because the employee may not know that they will essentially be earning less when they work overtime because of the sliding scale effect on their pay. Further, it's crucial that employers ensure that in situations where sliding scale effects occur that their employee's regular rate doesn't fall below the federal minimum standard.

The reality of Chinese Overtime is that employers often misapply it, either accidentally due to ignorance or purposefully to defraud workers of their owed wages. Even the most innocent of mistakes can cost a company millions in owed back wages and damages to employees. You worked hard for the money you earn. Companies that take advantage of your dedication and exploit your efforts by paying you less than you deserve are wrong. 

At Morgan & Morgan, we have wage and hour lawyers who litigate Chinese Overtime issues and other compensation disputes around the U.S. We've recovered millions in wage and hour lawsuits on behalf of our clients who had their pay wrongly reduced, were denied overtime, received less than minimum wage, and suffered other illegal actions taken by their employers. We fight these abusive practices aggressively to ensure you get the money you earned.

If you didn't get paid for overtime or were inadequately paid for your work, you might be able to file a lawsuit against your employer to get the compensation owed because of unpaid wages and additional damages. To find out if you have a case, contact our lawyers at Morgan & Morgan today. There is no fee or obligation.