Tag: flsa

FLSA Take-Away

“We will not rest until the (FLSA) is followed by every employer, and each worker is treated and compensated fairly.”

– U.S. Labor Secretary Hilda Solis announcing a 33% staffing increase in investigators.

A BusinessWeek report says Fair Labor Standards Act (FLSA) lawsuits have “exploded nationwide,” and that “because wage-and-hour laws have been so widely violated, undetonated land mines remain buried in countless companies.”

Don’t make these pay-related mistakes!

  1. Wrongly classifying employees as exempt versus overtime,
  2. Paying hourly employees incorrectly for their travel time,
  3. Failing to retain payroll records for the right amount of time,
  4. Improperly paying staff when you closed the office during that last snow storm, or
  5. Violating the “rounding law”.

All it takes is one employee filing one complaint.


The HR Experts for Small Business

Salary = Exempt From Overtime?

Many employers and business owners believe that because they pay someone on a salary basis they are exempt from receiving overtime.  This is not always the case.

A good example is someone working as a receptionist.  According to the Fair Labor Standards Act (FLSA), for a full time administrative employee to be exempt from receiving overtime, they must make more than $455 per week (or $11.37 per hour) and their primary duty includes exercising of discretion and independent judgment with respect to matters of significance.  A receptionist making $440 per week ($11 per hour) would not be exempt from receiving overtime on two accounts:

  1. Their salary is below the $455 per week threshold, and,
  2. Their main duty is to answer the telephone and not using judgment with respect to matters of significance.

In this instance the receptionist should be paid overtime for all hours physically worked over 40 hours in a week (i.e. vacation, holiday, and personal time do not apply as being physically worked).

Refer to the FLSA on the Department of Labor’s website for specific details as they relate to each employee classification.  OR, for any small business HR issues contact www.hrinsights.com.

The Small Business HR Resource

Overtime Rules’ Violations in the Crosshairs

Labor lawyers are doing a fine business in this ambivalent economy thanks much to employers’ unknowing abuse of overtime rules and/or misclassification of employees into exempt or non-exempt status.  Bill Bowen of The Dallas Morning News writes, “As the economy has tumbled, the number of fair wage cases investigated by the Dallas office in 2011 almost doubled the 642 in 2008.  Nationally, the department investigated a record number of wage and hour cases, most of which are for unpaid overtime.”  One theory explaining this trend is the complicated laws and changing workplace circumstances that confuse employers.  In fact, some estimate that between 60% and 80% of employers are NOT in compliance with the Federal Labor Standards Act (FLSA).  Are you?

Enacted almost 75 years ago, the FLSA may not be relevant to today’s workplace and the people who are employed there.  Mr. Bowen continues, “Gone are the clear lines of demarcation among manager, employee, administrative worker and the outside salesperson, designations that help define whether a worker is exempt from the wage and hour protections.”  And look at how work habits have changed.

Thanks to technology that did not exist back when banana splits were 16 cents and the minimum wage was 33 cents, employees can work flexible hours, from home or on the road, and they are more likely to be an independent contractor.  Try keeping up with the number of hours these people work!  As experience has played out, there are two typical types of “overtime violations”.

  1. “Off the Clock”:  When workers are asked to perform certain tasks before or after they start work, such as changing into special work clothing or daily “pre-meetings”.  Or, if they are asked to work during lunch.  Rule:  If the employee is on the premises and under the employer’s control, then they should be paid.
  2. “Classification Infractions”:  Today’s star example is the information technology position.  Do not classify a computer system employee by their job title.  Their job responsibilities are the important criteria in determining Exempt/Non-Exempt Status (NOTE to Clients: find the “Checklist for Identifying Exempt Employees” in the HRInsights Answers Tool).  Banks have also been on the hook for classifying Loan Officers as “Exempt” using the administrative exception. However, the Courts have found these employees to be spending the preponderance of their time selling loan products and are “Not Exempt”.

While small businesses won’t be hit with the large back-pay awards suffered recently by AT&T, IBM and others, the price tag for an infraction will hurt their pocketbook just the same.  So, take the time to review your employees’ status once a year.  You may find reason to make some changes.

Working Hours

Nonexempt employees are paid for all hours they perform work.  That’s it, right?  Of course that’d be much too easy.  Are you allowed to pay them only for the time that they are working?  What about waiting, rest periods or even some travel time?  The FLSA requires you to pay nonexempt employees for all of this.  Here are a couple of issues that will hopefully guide you in determining mandatory compensation for hours worked.

The Supreme Court provided the definition for working hours adopted by the FLSA regulations in its long-standing decision Tennessee Coal, Iron & Railroad Co. v. Muscoda Local No. 123, 321 U.S. 590 (1944). In that case, the Court determined that working hours include all time during which a nonexempt employee is engaged in physical or mental exertion controlled or required by the employer and pursued necessarily and primarily for the benefit of the employer and its business. (See 29 C.F.R. §785.7.) In addition, the time an employee spends after clocking in, getting to his job, and preparing for it generally should be paid. However, the time which the employee spends waiting, just because he arrived early, is not.

As a general rule, employers do not have to pay for any time before and after the employee’s “principal activity” unless there is a contract, custom, or practice requiring pay for these preliminary and concluding activities. However, time spent by employees in activities before or after the regular workday must be counted as time worked if the activities are an integral and indispensable part of the employee’s principal activities. (See 29 C.F.R. §785.9.) Working hours also may include time when the employee does not actually perform any work but is engaged to wait.

As is the case in many FLSA issues, your requirement to pay for ‘waiting time’ depends on some key points. According to the FLSA regulations, “facts may show that the employee was engaged to wait or they may show that he waited to be engaged. Such questions must be determined in accordance with common sense and the general concept of work or employment.” (See 29 C.F.R. §785.14.) The regulations generally distinguish between on duty time, off duty time, and on call time.

On-Duty Time: Where waiting is an engrained in the basic nature of the job, time spent waiting is compensable work time.  Where an employee cannot use the time effectively as personal time is another way to look at on duty waiting time that is compensable.

Off-Duty Time: An employee is considered to be off duty during periods when he is “completely relieved from duty and which are long enough to enable him to use the time effectively for his own purposes.” An employee is not completely relieved from duty unless he is told in advance he may leave the job and that he will not have to begin work until a specified hour has arrived.

On-Call Time: An employee who is required to remain on call on the employer’s premises is working while on call and must be paid for that time. In addition, an employee who must remain on call so close to the employer’s premises that he cannot use the time effectively for his own purposes is also working while on call.

Though a concept like ‘working hours’ seems to be generally accepted by many as the hours that we’re at work, the exceptions can become very granular in their specificity.  We, at HRInsights strive to make our members aware of these exceptions to FLSA and other laws that encompass HR compliancy.

Avoidable FLSA Mistakes

The Fair Labor Standards Act (FLSA) is the federal law that oversees wage and hour issues like overtime and minimum wage requirements.  When many companies or small business owners see “FLSA”, they start shaking in their boots.  There are so many different complex provisions of the FLSA that make it quite a difficult act to manage.  So, let’s take a step back and look at some common mistakes and how you may be able to prevent these mistakes from happening in your organization.

-Since many state laws conflict with federal laws, it is sometimes difficult to determine which laws needs to be adhered do.  The advice of many HR professionals here would be to follow the law that is more generous to the employee.  Do some research and look at your state’s law before doing anything pay-related.

-One of the most important things your organization can do is keep diligent records.  This applies to HR basics in general and not just the FLSA.  For the FLSA, however, you must keep records pertaining to hours worked and wages earned for nonexempt employees for 3 years.  This is entails everything that you would think; from total overtime pay for the workweek/pay period to total hours for the day/week/pay period and everything in between.

-This one is easy: DO NOT PERMIT “OFF THE CLOCK” WORK.  Even if an employee works unauthorized overtime hours, they must be paid.  To discourage this, you can create a policy where overtime work is prohibited unless previously approved by a manager.

-Though it seems easy, exemptions need to be applied properly.  Definitions are acutely defined in the FLSA.  Executive, administrative and professional, outside sales personnel, and certain IT positions are exempt not because of their job titles, but because of their job duties and their day-to-day responsibilities.

-Another classification mistake is one where an individual is determined to be an independent contractor before examining the employment relationship first.  There are very specific requirements that must be met in order for an individual to be classified as an independent contractor. The IRS’s ‘Common Law Test’ examines who has control over how work is done, whether the individual has unreimbursed expenses or  realizes a profit or loss from the working relationship, and whether there are written contracts or employee-type benefits involved.  You can submit a Form SS-8 for determination of worker status.

These are all common mistakes and there are plenty more.  The key to staying within the boundaries of FLSA is to keep on top of your state and federal laws as well as having a diligent system implemented to keep track of hours worked and wages earned.