Overtime

Healthcare Overtime Rules in Arizona

Who gets overtime, when the 8-and-80 system applies, what goes into the regular rate, and what changed for 2026.

General information, not legal or tax advice. Checked October 2026. Sources are listed at the end.

Overtime is where healthcare payroll most often goes wrong, because so many things feed into it: night and weekend differentials, pick-up shift bonuses, on-call pay, 12-hour shifts, and employees who work two roles at two rates. The mistakes add up fast: back pay, an equal amount in federal liquidated damages, and potentially treble damages for unpaid wages under Arizona law.

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 12-hour shift isn't overtime by itself under the standard workweek. Only the weekly total counts.
  • A fixed workweek. Pick a set seven-day period, such as Sunday to Saturday. You can't average two weeks together on a biweekly payroll unless you've adopted the 8-and-80 system described below.
  • No comp time. Private employers can't give time off later instead of paying overtime.

Who's exempt in healthcare

Most healthcare employees are non-exempt and earn overtime. The common exemptions are narrow:

  • Physicians practicing medicine are exempt professionals, with no minimum salary required.
  • Registered nurses can be exempt as learned professionals only when paid on a salary basis of at least $684 a week and doing professional nursing work. Hourly RNs aren't exempt, even at high rates.
  • Nurse practitioners and physician assistants are often treated as exempt professionals when salaried at that level, but check the duties and pay basis for each role.
  • LPNs, CNAs, medical assistants, techs, and caregivers generally don't meet an exemption and are owed overtime.

Paying a salary doesn't create an exemption by itself. The job has to meet both the duties test and the salary test.

The 8-and-80 system

Hospitals and residential care establishments can use a fixed 14-day work period instead of the workweek, under 29 CFR 778.601. A residential care establishment is one primarily engaged in caring for sick, aged, or mentally ill people who live on site, such as nursing homes and many assisted living and memory care communities. Under 8-and-80:

  • Overtime is owed for hours over 8 in any workday and for hours over 80 in the 14-day period, whichever gives more overtime hours.
  • The employee has to agree before the work is done, and the agreement should be in writing.
  • The 14-day period is fixed in advance; you can't switch systems from one period to the next to avoid overtime.

Example: one nurse, two systems

A nurse at a Tucson assisted living community works 48 hours one week and 32 the next, all in 8-hour shifts. Under the 40-hour week, she earns 8 overtime hours. Under an agreed 8-and-80 system, she earns none: no day went over 8, and the 14 days total exactly 80. If she picks up a single 12-hour shift, though, 4 of those hours are overtime under 8-and-80 even if the period stays under 80.

Home care agencies, outpatient clinics, and most medical and dental practices don't qualify and use the standard 40-hour week.

What goes into the regular rate

Overtime is time and a half of the regular rate, not the base wage. In healthcare, the regular rate usually includes:

  • Hourly pay at every rate the employee earned that week
  • Night, weekend, and other shift differentials
  • On-call pay for being available
  • Non-discretionary bonuses employees expect when they meet a condition: pick-up shift, attendance, retention, and productivity bonuses

It generally leaves out truly discretionary bonuses, expense reimbursements such as mileage, and a holiday premium of at least time and a half for hours worked on a holiday. When an employee works two jobs at two rates, overtime is usually figured on the weighted average: total straight-time pay divided by total hours. Shift differentials, on-call, and call-back pay, with a worked example.

24-hour shifts and sleep time

For employees on duty 24 hours or more, you and the employee can agree to exclude a regularly scheduled sleeping period of up to 8 hours, plus bona fide meal periods, under 29 CFR 785.22. That only works if you provide adequate sleeping facilities and the employee can usually sleep without interruption. Calls to work during the sleep period are paid, and if the employee can't get at least 5 hours of sleep, the whole period counts as work time.

For shifts under 24 hours, all time on duty is work time, even if the employee is allowed to sleep when nothing is happening (29 CFR 785.21). Employees who live on the premises are covered by separate rules, so get advice before excluding any of their time.

Home care: travel time and the federal rule

For home care agencies, overtime usually comes from travel. Travel from one client to the next during the workday is paid time and counts toward the 40, while a normal commute to the first client doesn't. Caregiver travel time and mileage.

Since 2015, federal rules have barred home care agencies and other third-party employers from using the companionship and live-in exemptions, so agency caregivers are owed minimum wage and overtime. In July 2025 the Department of Labor proposed restoring those exemptions for third-party employers and paused its own enforcement of the 2015 rule. As of our last check, no final rule had been issued, and caregivers can still bring private claims. See caregiver payroll before changing any pay policy.

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, not the whole overtime paycheck, and not overtime paid only because of company policy.

That matters in healthcare, where many employers pay overtime that federal law doesn't require, such as daily overtime after 8 or 12 hours outside an 8-and-80 system. For 2026, employers report qualified overtime on each employee's W-2 in Box 12 with code TT, so your payroll has to separate the FLSA-required premium from policy overtime every period.

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. The exception is an employer using the 8-and-80 system, which adds overtime for hours over 8 in a day.

Are nurses exempt from overtime?

Registered nurses can be exempt as learned professionals only if they're paid on a salary basis of at least $684 a week and do professional nursing work. RNs paid by the hour aren't exempt, and LPNs, CNAs, medical assistants, and caregivers generally aren't either.

Who can use the 8-and-80 overtime system?

Hospitals and residential care establishments, meaning facilities primarily engaged in caring for sick, aged, or mentally ill people who live on site, such as nursing homes and many assisted living communities. Employees have to agree before the work is done. Home care agencies, clinics, and most practices can't use it.

Do I have to pay for sleep time on a 24-hour shift?

For shifts of 24 hours or more, you and the employee can agree to exclude up to 8 hours of sleep time if you provide adequate sleeping facilities and the employee usually gets uninterrupted sleep. Interruptions to work are paid, and if the employee can't get at least 5 hours of sleep, the whole period is paid. For shifts under 24 hours, all on-duty time is paid even if sleeping is allowed.

What is code TT on a 2026 W-2?

Box 12, code TT reports qualified overtime compensation: the FLSA-required half-time premium. It supports the federal overtime deduction available for 2025 through 2028. Overtime paid only under company policy generally doesn't count.

Get overtime right every pay period

A payroll provider or PEO can handle differentials, 8-and-80 schedules, weighted-average overtime, and 2026 W-2 overtime reporting. Free quote, no obligation. Use the quote form

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Sources