Employees at my company can work more than 40 hours per week at the employees discretion. The employee can also work less than 40 hours per week. The work is blue collar in nature, a construction company.

Is the employer required to pay employees 1.5 times the 'base' hourly rate for time beyond 40 hours per week even if the employer does not have any maximum or minimum hourly requirements? :confused:

We have a flexible schedule and allow the employees to make extra money in lieu of say getting a second job. It seems odd to me that the company would essentially be penalized to allow employees to work in excess of 40 hours. If the company is required to pay 1.5 times, then it would be more advantageous to not permit employees to work more than 40 hours per week.

That is a unique workplace. Where there is not set shift or definition of full-time, it is hard to say if overtime work rules apply since the worker sets their own shifts. From what you are saying, I do not think time and a half overtime would apply because there is no baseline for what is a full time shift. This is unique. Still, FLSA or Fair Labor Standards Act would apply.
FYI
http://www.dol.gov/dol/compliance/comp-flsa.htm

Is the employer required to pay employees 1.5 times the 'base' hourly rate for time beyond 40 hours per week even if the employer does not have any maximum or minimum hourly requirements? Yes. It doesn't matter how flexible the work schedule is, under federal law employers are required to pay time and a-half to all non-exempt employees for hours worked in excess of 40 in each 7-day payroll period.

It seems odd to me that the company would essentially be penalized to allow employees to work in excess of 40 hours. (a) Allow? Many employees don't want to work in excess of 40 hours (you must have missed all the other posts here from individuals complaining about being forced to work overtime) and (b) OT after 40 hours has been the federal law since 1934.

If the company is required to pay 1.5 times, then it would be more advantageous to not permit employees to work more than 40 hours per week Which is why most employers do not allow any employees to work overtime unless management has specifically authorized it.

ml23, it appears you may be a member of management and it also appears your company may be in major violation of both State and federal wage and hour laws. I strongly urge you to attend to this and get into compliance immediately as if one of the employees decides to make a complaint to the Department of Labor about unpaid overtime, the company is going to be in a world of hurt. They could audit your timesheets and payroll records going back 2 - 3 years, require you to pay back OT to all those employees, and impose penalties and fines. $$$$$$$$