June 17, 2026 | Posted By: Emma Doull
Overtime pay is one of the most regulated areas of employment law, and for good reason. Under the Fair Labor Standards Act (FLSA), most employees who work more than 40 hours in a week must be paid at one and a half times their regular rate. Employers generally cannot contract around that requirement, even in a collective bargaining agreement. But there are two narrow exceptions, and a recent Department of Labor (DOL) Opinion Letter offers a useful look at how they work.
The Background: A Scheduled Workforce and Roll Call Pay
The DOL Opinion Letter examines a workforce operating on fixed eight-hour shifts under a recurring schedule of four days on and two days off. Over each six-day cycle, employees work 32 hours. During contract negotiations, the employer and union considered adding a paid 15-minute roll call at the start of each shift, intended to bring annual hours closer to a typical full-time schedule of 2,080 hours per year.
The Department of Labor first confirmed that these roll calls constitute compensable hours worked. Because the time is preliminary but still classified as hours worked under the agreement, it must be paid. That determination is consistent with longstanding FLSA guidance on compensable time. The more significant question in the Opinion Letter is whether the parties could use the collective bargaining agreement to structure overtime differently than the standard over-40 rule.
The General Rule: CBAs Cannot Waive Overtime
Under normal circumstances, a collective bargaining agreement cannot eliminate or reduce overtime protections guaranteed by federal law. The FLSA sets a floor, and individual or collective agreements that fall below it are unenforceable. That said, Congress carved out two specific exceptions for union workforces in Section 7(b) of the FLSA. These provisions allow employers and unions to agree on alternative overtime structures if certain precise conditions are met.
Structure One: The 26-Week Arrangement
The first alternative applies to employees whose work is irregular or cyclical. Under this structure, a collective bargaining agreement may substitute a different overtime threshold if both of the following apply:
- First, the employer must pay overtime for all hours worked beyond 12 in a single day or beyond 56 in a single workweek.
- Second, no employee may work more than 1,040 hours in any consecutive 26-week period.
That rolling window requires ongoing tracking, because the period is not fixed to a calendar quarter or set schedule. It moves continuously, and employers must ensure no employee crosses the 1,040-hour ceiling within any such window.
If an employee exceeds the maximum, the exemption is lost retroactively for the entire period, and the employer must recalculate overtime based on the standard 40-hour rule. That can create significant back-pay exposure, making careful recordkeeping essential.
Structure Two: The Annual Guarantee Arrangement
The second alternative is better suited to workforces with more predictable annual schedules. It operates over a 52-week period and involves a guaranteed annual hours commitment. To qualify, the collective bargaining agreement must satisfy all of the following conditions:
- The agreement must specify the applicable hourly rate.
- Over the designated 52-week period, employees must be guaranteed a minimum of 1,840 hours, or the equivalent of at least 46 weeks at their normal weekly schedule if that schedule is at least 30 hours per week.
- The maximum hours an employee may work during the period is 2,240.
- Finally, the employer must pay overtime for any hours worked beyond the guaranteed amount that also exceed 40 in a given workweek, and for all hours worked beyond 2,080 in the 52-week period.
Like the first structure, exceeding the 2,240-hour ceiling voids the exemption. The employer must then recalculate overtime for the entire year under standard FLSA rules, which can result in a substantial financial correction.
Why This Matters for Employers With Unionized Workforces
These arrangements are not commonly used, and many employers with union workforces are unaware they exist. When properly structured, an annual guarantee can offer scheduling flexibility that benefits both management and labor. Employees gain predictability in their earnings and a guaranteed floor on annual hours. Employers can manage staffing and overtime costs in ways that a simple week-by-week calculation cannot.
At the same time, these structures carry real compliance risk. The 26-week rolling window, guaranteed minimums, hour ceilings, and hourly rate specifications all require precise drafting and diligent tracking. A miscalculation or a missed deadline can void the exemption and expose the employer to retroactive liability under the FLSA. Employers considering either arrangement should work closely with employment counsel during the bargaining process, not after the agreement is signed.
Checking Your Current Agreement
If your organization already has a collective bargaining agreement in place, it is worth reviewing whether it purports to modify overtime obligations in any way. Agreements that attempt to change overtime thresholds without meeting the Section 7(b) requirements are unenforceable and may expose the employer to wage-and-hour claims. Even well-intentioned provisions can create liability if the technical conditions are not precisely satisfied.
Wage and hour compliance is one of the most active areas of employment litigation. The Department of Labor continues to issue guidance, conduct audits, and bring enforcement actions against employers of all sizes. Understanding the full scope of what your CBA can and cannot do is a necessary part of a sound HR and legal compliance strategy.
Speak With an Employment Attorney
Hoyer Law Group can help you assess your overtime obligations and structure arrangements that withstand scrutiny. Contact us today for a confidential evaluation at www.hoyerlawgroup.com/contact/ or call (844) 531-0082.
This blog is for general informational purposes only and does not constitute legal advice. For advice specific to your situation, please consult a qualified attorney.