Iowa Overtime Laws

September 15th 2024

Iowa Labor Laws include provisions for overtime pay to ensure fair compensation for employees who work beyond standard hours. Under Iowa overtime laws, non-exempt employees are entitled to receive one and a half times their regular rate of pay for each hour worked beyond 40 hours in a workweek. These laws aim to protect workers from excessive work hours without appropriate compensation and promote a balanced work-life dynamic.

This article will provide information to successfully navigate Iowa’s overtime regulations, whether you’re an employer aiming for compliance or an employee defending your rights.

This article covers:

Iowa Overtime Rates

Overtime rates refer to additional compensation that employees in Iowa may be entitled to receive when they work beyond their regular working hours. In Iowa, employees who work over 40 hours per week are entitled to overtime pay at time-and-a-half (1.5) for every additional hour worked. 

Since the regular minimum wage in Iowa is $7.25 per hour, this means Iowa’s overtime minimum rate is $10.88 per hour. 

Overtime Entitlement in Iowa

According to Iowa overtime laws, overtime pay is required for any non-exempt employees. 

Employees in non-exempt industries who make less than $844 per week ($43,888 annually) are entitled to overtime compensation.

However, an employee’s overall eligibility for overtime pay is based on job duties or business they are involved in.

Read more about Overtime Exceptions and Exemptions in Iowa.

Compensatory Time in Iowa

In Iowa, compensatory time, “comp time”, is time off that can be authorized instead of overtime pay.

For a regular full-time employee receiving an hourly rate, comp time is applicable for all hours worked over 40 hours in a work week. An employee can accumulate up to 80 hours of comp time. 

For a regular part-time employee receiving an hourly rate, comp time is also applicable for hours worked over 40 hours in a work week. However, the maximum amount of comp time they can accumulate is 60 for three-quarter-time employees and 40 for half-time employees.

Any hours exceeding the maximum accumulated comp time will be compensated by overtime pay.

Overtime for Tipped Employees in Iowa

In Iowa, the overtime rate for tipped employees is 1.5 times their regular wage for every overtime hour worked. However, tipped employees are subject to a lower minimum wage of $4.35 per hour instead of the regular state minimum wage. 

The use of a “tip credit” system, which permits employers to pay tipped employees a reduced minimum wage, is permitted by both state and federal legislation. However, it is important to note that tipped workers must accumulate enough tips to total up to the regular minimum wage of $7.25. If their wage, including tips earned, falls below the regular minimum wage, their employer must make up the difference.

That being said, an employer cannot include that tip credit in the calculation of overtime pay. This means that the entire minimum wage (following the Iowa minimum wage, which is $7.25) must be taken into account when calculating overtime pay.

Overtime for Salaried Employees in Iowa

Iowa recognizes the entitlement of overtime pay for certain salaried employees. A salaried employee refers to an individual who receives a predetermined salary, regardless of the number of hours worked.

To determine a salaried employee’s overtime rate, an employer must first determine their employee’s hourly rate by dividing the salary by the number of hours that salary compensates for.

Then, take the hourly pay rate to calculate the overtime rate for salaried employees using the following formula:

Hourly pay rate x Overtime Hours x Overtime Rate (1.5)

It is important to note that if an employee’s salary covers less than 40 (hours) in a workweek, their regular rate will be added for every subsequent hour working up to the 40. Only after 40 hours will time-and-a-half be counted.

If an employee’s salary covers 40 (hours) in a workweek, then time-and-a-half will be paid for any hours over 40.

Calculating Overtime with Commission in Iowa

In Iowa, employees who may receive commissions are still entitled to overtime pay, although the rate may differ.

If an employee receives weekly commissions, the commission will be combined with the employee’s weekly wage to get the total earnings for the week. The amount is then divided by the total number of hours worked in the week to determine the regular hourly rate for that week. For any hours worked beyond 40 per week, the employee must be paid additional compensation at a rate of half of the regular hourly rate.

For example, let’s say an employee works 45 hours a week at a rate of $7.25/hour (Iowa minimum wage) and receives $50 in commissions for that week. 

(Total hours x Hourly Rate) + Commission

= (45 x 7.25) + 50

= $376.25 (total earnings for the week)

Then, divide that by the total hours worked in the week.

= 376.25 / 45

=$8.36 (new regular hourly rate)

To determine the overtime rate for the commissioned employees, we need to take that new regular hourly rate and halve it.

$8.36 / 2

= $4.18

Since the employee worked an extra 5 hours in the week, that makes his overtime compensation $20.90 ($4.18 x 5 hours).

The amount will vary according to the hours worked, hourly rate, and commission earned.

Overtime Exceptions and Exemptions in Iowa

The federal Fair Labor Standards Act (FLSA) governs employees who are exempt from overtime pay. The following are among the exempted:

  • Executives, administrators, and other professionals earning at least $844 per week
  • External salespeople 
  • Computer-related workers
  • Independent contractors
  • Transportation workers
  • Certain agricultural and farm workers
  • Live-in employees such as housekeepers

Penalties for Not Providing Overtime Pay to Employees in Iowa

In Iowa, if an employer pays less than the overtime compensation amount an employee is entitled to, that employer is legally obligated to pay that employee the total amount of unpaid overtime wage plus additional damages.

The Fair Labor Standards Act (FLSA) protects employees who file overtime wage complaints from being terminated. 

Statute of Limitations for Unpaid Overtime Claims in Iowa

The statute of limitations for an employee to file for an overtime wage complaint is two years. This can be increased to three years if the employer knowingly and willfully violated overtime regulations.

Legal Cases Relating to Overtime Compensation in Iowa

Below, we present law cases relating to fair overtime compensation for employees in Iowa: 

1. Police Dog Handler Fails to Adhere to Proper Procedure for Overtime Wage Claims

In the case of Kleppe v. Fort Dodge Police Department, former police officer Troy Kleppe filed a wage claim lawsuit against the Fort Dodge Police Department and the city of Fort Doge (the “City”). Kleppe claimed that he was owed overtime pay for his work as a police canine handler and trainer. 

Kleppe worked for the Fort Dodge Police Department. His employment was covered by a Collective Bargaining Agreement (CBA) between the City and the Public Professional and Maintenance Employees Local Union. Kleppe discussed his unpaid wages with his union representative and filed a grievance that claimed the City failed to pay him overtime wages for training the police dog. However, the City denied the grievance as untimely and informed Kleppe of the CBA provision, which allowed 12 hours of flex time per month for canine handlers. Instead of appealing the denial as per the CBA, Kleppe decided to sue the City for unpaid wages under the Iowa Code chapter 91A.

The City argued that Kleppe’s grievance was untimely and he had not followed the proper grievance procedure that was outlined in the CBA. The district court agreed with the City and granted summary judgment in their favor. The court determined that Kleppe should have exhausted his administrative remedies before pursuing a separate action. 

Kleppe tried to appeal this summary judgment by arguing that his claim did not fall under the CBA but rather under the Iowa Wage Payment Collection Act. However, the court found that Kleppe’s claim was directly related to the CBA. The court affirmed the grant of summary judgment to the City.

Key lessons from this case:
  • An employee must follow proper procedures when pursuing an unpaid overtime wage claim.
  • Pay attention to any flex time arrangements or provisions in a CBA that may impact how overtime is calculated and compensated for an employee.
  • It is important to note that a CBA may require an employee to follow certain administrative procedures in resolving disputes before seeking legal action.

2. University Implements Sovereign Immunity Against Claims for Overtime Back Wages

In the case of Melinda Myers v. Iowa Board of Regents, employees of the University of Iowa Hospitals and Clinics (UIHC) filed a lawsuit against the Iowa Board of Regents (the “Board”). The employees claimed that UIHC was consistently late in paying their overtime wages, which were not included in their regular wages for the respective pay period. The Board argued that it had sovereign immunity and did not consent to private suits under the federal FLSA.

The Board sought to dismiss this case but was denied by the district court. The district court determined that the Board had waived sovereign immunity by implementing policies that incorporated FLSA wage and overtime pay standards. However, an appellate court disagreed with the district court’s decision. 

The appellate court considered whether the Board implicitly consented to the lawsuit. The employees claimed that UIHC’s policies showed that the Board agreed to follow the FLSA. However, the court did not find any evidence that proved the Board had approved these policies. It was found that the Board hadn’t given up its sovereign immunity as its current rules didn’t guarantee FLSA overtime pay. Therefore, the Board couldn’t be sued under the FLSA.

In summary, the appellate court reversed the district court’s decision to dismiss the Board’s motion to dismiss and the case was remanded back to the district court for further proceedings.

Key lessons from this case:
  • “Sovereign immunity” is a legal principle that shields certain entities from being sued without their consent. However, exceptions may exist if the entity voluntarily waives this immunity.
  • An employer needs to ensure the policies in their handbooks and manuals are aligned with applicable labor laws and clearly state an employee’s rights.
  • In overtime wage claims, the burden of proof lies with the employee, who must provide evidence to demonstrate their unpaid wages or establish that their employer violated specific policies.

3. Office Manager Not Provided with Overtime Pay Despite Being Non-Exempt

In the case of Schram v. Bilgi, Jackalyn Schram, who worked as an office manager for Dr. Jaya Bigli, filed a lawsuit against Dr. Bilgi under the Iowa Code and the Fair Labor Standards Act (FLSA). This lawsuit alleged nonpayment of vacation time and overtime compensation. The district court granted Schram only partial payment, which was for her unused vacation time. Schram’s FLSA claims were rejected because she was an exempt employee.

Schram decided to appeal this decision. The main issue was whether Schram was considered an exempt employee under the FLSA. Schram was paid on an hourly basis, starting at $18 per hour and gradually increasing to $24 per hour. Her compensation varied based on the hours she reported working each week. Despite regularly working over 40 hours per week, Schram did not receive additional overtime compensation like other employees. She argued that the hourly pay structure implied that she was a non-exempt employee.

The district court disagreed with Schram’s argument and concluded that she was exempt based on its decision on the “salary-basis test”. The burden of proof was on Dr. Bilgi to demonstrate that Schram met the test. Schram decided to appeal this decision. On appeal, the court examined the evidence and determined that Schram did not meet the salary-basis test for exemption. It found that Schram was paid on an hourly basis without a guaranteed minimum salary. The court emphasized the lack of documented guarantee or any mention of a minimum rate per week in Schram’s employment agreement. 

The court decided that Schram was non-exempt and reversed the initial district court ruling. The case was remanded for further consideration.

Key lessons from this case:

  • The FLSA’s salary-basis test requires employees to be compensated on a salary basis of not less than a specified amount to qualify for exemption from overtime pay.
  • A payment arrangement based on an hourly rate may indicate that an employee is non-exempt and eligible for overtime pay.
  • Employers should maintain clear documentation regarding employees’ compensation, including any guarantee of a minimum salary or hourly rate.

Learn more about Iowa Labor Laws through our detailed guide.

Important Cautionary Note

This content is provided for informational purposes only. While we make every effort to ensure the accuracy of the information presented, we cannot guarantee that it is free of errors or omissions. Users are advised to independently verify any critical information and should not solely rely on the content provided.