“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!
- Wrongly classifying employees as exempt versus overtime,
- Paying hourly employees incorrectly for their travel time,
- Failing to retain payroll records for the right amount of time,
- Improperly paying staff when you closed the office during that last snow storm, or
- Violating the “rounding law”.
All it takes is one employee filing one complaint.
The HR Experts for Small Business
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:
- Their salary is below the $455 per week threshold, and,
- 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
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”.
- “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.
- “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.