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.