The Short Version
Only the overtime premium required by section 7 of the Fair Labor Standards Act qualifies — pay at one and one-half times your regular rate for hours worked beyond 40 in a workweek. Overtime you are owed purely under state law, under a union contract, or by company policy does not qualify on its own, even though it is real overtime and feels identical in your paycheck.
The Federal Test
The FLSA rule is narrower than most people assume. Per DOL Fact Sheet #23, covered non-exempt employees must receive overtime at no less than time-and-a-half for hours worked over 40 in a workweek. Three consequences follow:
- The workweek is the unit. A workweek is a fixed, regularly recurring period of 168 hours — seven consecutive 24-hour periods. It does not have to start Monday or align with a calendar week, but the employer must fix it and stick to it.
- Long days do not trigger federal overtime. A 12-hour shift creates no FLSA overtime if the week totals 40 hours or fewer.
- Weekends and holidays are not special. The FLSA does not require overtime for Saturday, Sunday, or holiday work as such. Premium pay for those days is a contractual perk, not a federal requirement.
What Does Not Qualify
These are the categories that most often get claimed in error:
- State daily overtime. California requires time-and-a-half after 8 hours in a day and double time after 12. Alaska, Nevada, and Colorado have their own daily rules. Those premiums are state-law obligations. They qualify only where the same hours also carry the week past 40.
- Seventh-consecutive-day premiums. A California-style seventh-day rule is state law, not FLSA.
- Double time. The FLSA requires one and one-half times, never more. Where an employer pays double time, the portion above the FLSA-required premium is not qualified overtime compensation.
- Contractual overtime. A collective bargaining agreement setting overtime after 35 hours, or a policy paying premium rates for undesirable shifts, exceeds the federal floor. The excess does not qualify.
- Exempt employees. Salaried employees properly classified as exempt are owed no FLSA overtime, so extra payments for long hours are not qualified overtime — regardless of what the payment is labelled.
- Shift differentials and bonuses. These are not overtime at all, though they can change the regular rate. See below.
The California case deserves emphasis because it affects millions of workers. A California employee who works four 10-hour days earns daily overtime under state law for eight hours that week, but works only 40 hours total. Federal overtime: zero. Qualified overtime compensation: zero. The state premium is fully taxable.
The Regular Rate Trap
Here is the subtlety that catches payroll teams. The FLSA premium is one half of your regular rate, and the regular rate is not always your base hourly wage. It must include most non-discretionary compensation — production bonuses, attendance bonuses, shift differentials, commissions — spread across the hours worked.
An employee at $20/hour who earns a $200 non-discretionary weekly bonus across 50 hours has a regular rate of $24/hour, not $20. Their FLSA premium for the 10 overtime hours is $12/hour, not $10 — so the qualified overtime compensation is $120, not $100.
This cuts both ways. Employers who calculate overtime off base rate alone are underpaying overtime and understating code TT. Our FLSA regular-rate calculator isolates the correct figure when bonuses are in play.
How to Check Your Own Situation
- Confirm you are non-exempt. If your employer pays you overtime at all, you probably are, but exempt employees receiving discretionary extra pay are a real edge case.
- Identify your employer's fixed workweek and total your hours within it — not by pay period, and not by day.
- Count only hours above 40 in that workweek.
- Take the premium half of those hours, using your true regular rate.
- Run the annual total through the no tax on overtime calculator to apply the cap and phase-out.
For 2026 and later your employer does this work for you and reports the result in Box 12, code TT. The exercise above is still worth doing once, as a sanity check on their number.