I have a very small little busniess and I am wondering I am taking on my first employe and I am not sure if I have to pay over time or not?

We work 40 to 50 houres a week but some of them houres are drive time in between jobs..

So do I need to pay overtime?

You do if you're subject to the FLSA AND your employee doesn't meet the criteria for exempt status.
http://www.dol.gov/elaws/esa/flsa/scope/screen9.asp

What is this employee going to be doing?

The employe will be doing wood refinishing in differnt locations in the State..

No way that the employee could qualify under the outside sales exemption. This is a blue-collar job and overtime will be required if the company is subject to the FLSA. Use the link I provided to test whether you are subject or not.

Also, see here for state requirements.
http://www.state.sd.us/applications/LD01DOL/frameset.asp?navid=&filtertype=1

I would also note that the FLSA considers drive time between jobs as hours worked, though generally speaking, travel from home directly to the first work site and vice versa is not.

As I read it if we are under $500,000 a year we do not have to pay the overtime and we are well below that range..

The 500k is only one issue. There are more which I can't totally recall right now, but Interstate commerce is one.

Do you buy anything from out of state? If so you're subject to the FLSA.

I'm sure the others will be by soon to explain further

As I read it if we are under $500,000 a year we do not have to pay the overtime and we are well below that range..

That helps your company to be exempt, but if you are engaged in interstate commerce (and darn near everyone is), you get to comply with the fair labor standards act and pay minimum wage and overtime. You can be engaged in interstate commerce if you order a pencil from a supplier in another state.

Even an out of state phone call will do it in most cases.

Keep in mind that is the employee himself must be involve in interstate commerce, not the employer, that is why is call "Individual coverage" IF the employee himself is not involve in interstate commerce, there is no "Individual coverage"

Individual Coverage
Even when there is no enterprise coverage, employees are protected by the FLSA if their work regularly involves them in commerce between States ("interstate commerce"). The FLSA covers individual workers who are "engaged in commerce or in the production of goods for commerce."

http://www.dol.gov/esa/regs/compliance/whd/whdfs14.pdf

Army, I believe that only applies if the employER fails under both the $500K test AND the enterprise coverage test.

Army, I believe that only applies if the employER fails under both the $500K test AND the enterprise coverage test.

Actually the $500k and enterprise coverage are one and the same. There is only two types of coverages, Enterpise and Individual, if you don't count the automatically covered business such as, hospitals, businesses providing medical or nursing care for residents, schools and preschools, and government agencies as a third type of coverage. In Wage Hour lingo there are only two types of coverage 'cause the hospitals, businesses providing medical or nursing care for residents, schools and preschools, and government agencies are considered enterprise without regard to the $500k, as is not applicable to them.

Agreed with Army on this one. If we go back far enough in time, "individual" coverage was all that there was. Each employee was basically examined separately to determine if FLSA was applicable. Enterprise Coverage was first added in 1961 (and modified in 1966 and 1974). The factsheet that Army previously cited has a decent discussion on the subject. The employer first sees if they pass Enterprise Coverage. If so, game over, all employees are FLSA applicable.

However if the employer does not qualify for Enterprise Coverage, it gets complicated. Each employee needs to be reviewed separately and in theory not all employees could be subject to FLSA. A complication is that most court decisions have come down strongly on the "FLSA applicable" side of things. It is not impossible for an employee to not be subject to FLSA, but most employees are, even most employees who work for employers not subject to Enterprise Coverage. But if Jane and John are the only two employees and Jane orders one of the infamous out-of-state pencils, Jane only just became FLSA applicable. John has to actually cross the "interstate commerce" line all by himself under the individual coverage rules. Not that this is difficult to do.

Last issue. SD is not my state and I have no idea what their overtime rules are, but states can and occasionally do have their own OT rules. A state can make an employee who is not FLSA applicable subject to overtime. Worse, depending on what remedy the employee chooses, it might be state DOL or state court instead of federal DOL who gets to decide if federal law (FLSA) is applicable. It does get complicated at times.

The state overtime requirements are listed in the second link I provided.

However, DAW, you said if the employer does not qualify for Enterprise Coverage, it gets complicated. Each employee needs to be reviewed separately and in theory not all employees could be subject to FLSA.

I think that is what I was trying to say. Conversely, if the employer DOES qualify for enterprise coverage, all employees are covered, not just those who buy the pencils.