Overtime
Construction Overtime Rules in Arizona
Who gets overtime, how to figure the regular rate when a worker has more than one pay rate, and what changed for 2026.
Overtime is the most common place construction payroll goes wrong, and the mistakes add up fast: back pay, an equal amount in federal liquidated damages, and potentially triple damages for unpaid wages under Arizona law. The rules themselves aren't complicated once you know which pay goes into the math.
The basic rule
- Over 40 hours in a workweek earns time and a half under the federal Fair Labor Standards Act (FLSA).
- No daily overtime in Arizona. A 10- or 12-hour day isn't overtime by itself. Only the weekly total counts.
- A fixed workweek. Choose a set seven-day period, such as Sunday to Saturday. You can't average two weeks together, even on a biweekly payroll; a 50-hour week and a 30-hour week still owe 10 hours of overtime.
- Almost all field workers are non-exempt, including working foremen. Paying a salary doesn't change that unless the job meets both the duties test and the salary test for an exemption.
- No comp time. Private employers can't give time off later instead of paying overtime.
What goes into the regular rate
Overtime is time and a half of the regular rate, not necessarily the base wage. The regular rate includes:
- Hourly pay, day rates, and piece rates
- Non-discretionary bonuses, such as production, safety, or attendance bonuses workers expect when they hit a target
- Shift differentials and other premiums tied to the work
It generally leaves out truly discretionary bonuses, reimbursed business expenses, and the overtime premium itself.
Multiple pay rates in one week
When a worker earns two or more rates in a week, the usual method is a weighted average: total straight-time pay divided by total hours.
Example
A Mesa framer works 32 hours framing at $25 and 12 hours running a skid steer at $31, 44 hours total. Straight-time pay is $800 + $372 = $1,172. The regular rate is $1,172 ÷ 44 = $26.64. The overtime premium is 4 hours × $13.32 = $53.27, for gross pay of $1,225.27.
The FLSA also lets you pay overtime at the rate for the work actually performed during the overtime hours, but only if you and the worker agreed to that before the work was done.
Day rates and piece rates
A day rate doesn't remove overtime. For a day-rate worker, add up the week's day-rate pay, divide by all hours worked to get the regular rate, and pay an extra half of that rate for each hour over 40. Day-rate and piece-rate pay also has to average at least the minimum wage for all hours worked: $15.15 statewide in Arizona in 2026, $15.45 inside Tucson, and $18.35 inside Flagstaff.
Drive time, shop time, and per diem
- Between jobsites: travel from one site to another during the workday is paid work time.
- Shop first: if crews report to the shop to load up or get assignments, the paid day starts there.
- Home to the first site: a normal commute generally isn't paid time.
- Per diem: a per diem that's a reasonable estimate of travel expenses generally stays out of the regular rate. One that goes up with hours worked generally goes into it.
All of these hours count toward the 40, so drive time is often what tips a week into overtime. Drive time across the West Valley.
New for 2026: overtime on the W-2
The One Big Beautiful Bill Act created a federal income tax deduction for qualified overtime compensation for 2025 through 2028, up to $12,500 per return ($25,000 for joint filers), phasing out at higher incomes. "Qualified overtime" is only the FLSA-required premium: the extra half-time for hours over 40 in a workweek, not the whole overtime paycheck, and not overtime paid only because of company policy or a union contract.
For 2026, employers report that amount on each employee's W-2 in Box 12 with code TT. Your payroll system has to track the FLSA overtime premium separately for every workweek, which also helps with workers' comp, since the overtime premium is usually left out of comp payroll.
Overtime on federal projects
On Davis-Bacon projects, overtime is time and a half of the basic hourly rate; the fringe benefit amount isn't multiplied. Contracts over $100,000 also fall under the Contract Work Hours and Safety Standards Act's overtime requirement. Prevailing wage in Arizona.
When overtime is paid
Arizona requires at least two paydays a month, no more than 16 days apart. Overtime has to be paid no later than 16 days after the end of the pay period in which it was earned.
Overtime questions
Does Arizona have daily overtime?
No. Arizona has no daily overtime rule. Non-exempt employees earn time and a half for hours over 40 in a workweek under the federal Fair Labor Standards Act.
Can I pay a foreman a salary to avoid overtime?
Usually not. A working foreman who does hands-on work is almost always non-exempt. Salary alone doesn't create an exemption; the job has to meet both the duties test and the salary test.
Do I owe overtime on a day rate?
Yes, for non-exempt workers. Divide the week's day-rate pay by all hours worked to get the regular rate, then pay an extra half of that rate for each hour over 40.
Does drive time count toward overtime?
Travel between jobsites during the workday counts as hours worked, and so does time at the shop before heading out. A normal commute from home to the first site generally doesn't.
What is code TT on a 2026 W-2?
Box 12, code TT reports the qualified overtime compensation an employee earned: the FLSA-required half-time premium for hours over 40 in a workweek. It supports the federal deduction for qualified overtime available for 2025 through 2028.
Get overtime right every week
A payroll provider or PEO can handle weighted-average overtime, day rates, and 2026 W-2 overtime reporting. Free quote, no obligation. Use the quote form