Ok. This is the first time I have ever heard of a company doing this. My Company says we must work "40 Physical Hours a week" before calculating overtime. This doesn't count time paid for Vacation or Company Holidays

Ie: since Memorial day falls on Monday if we work Tues- Fri 10hrs a day then our paycheck will be for 48 hours at straight time (40 +8hrs Holiday pay for Monday). Is this legal or should it be 40 straight hours and 8 overtime hours

I am in Tennessee. I hope this scenario makes sense if you have any other questions or need clarifications please ask

It is quite legal to pay you 8 holiday at straight time, and then 40 work hours at straight time.

That you have never seen this before means you have been very fortunate since there is no law in any state requiring companies to pay overtime under those circumstances. If a company pays 8 holiday, 32 regular and 8 overtime, it does so voluntarily.

Agreed. Federal rules are overtime is hours actually worked past 40 in the work week. Companies that choose to treat holiday or other PTO hours as worked exist, but this is not a legal requirement, and I am pretty sure that the large majority of the millions of U.S. employers do not follow this practice. I have worked for exactly one employer who followed this practice and they got rid of it in the 1980s.

The webpage below is the federal DOL rules on overtime. Most states follow the federal rules as is. The 5 or so states with more generous rules have daily overtime rules in addition to the federal rules. None of the 50 states require that holiday or PTO hours be treates as "hours worked" for purposes of overtime.

http://www.dol.gov/esa/regs/compliance/whd/whdfs23.htm