On August 23, 2004, substantial changes were made to the Fair Labor Standards Act’s (FLSA) overtime regulations. Ever since then, the issue of overtime and defining exempt/nonexempt employees has been a hot topic. FLSA can be intimidating to manage but fortunately many of the common mistakes made by employers can easily be identified and resolved. Below are just a few FLSA mistakes you should try to avoid.
Misclassification of exempt employees
Before you can re-evaluate your compensation procedures, you must make sure you are classifying workers according to FLSA guidelines. Employees in executive, administrative, professional, computer, or outside-sales positions are often considered except but not in all cases so be sure to do the proper salary and duty tests to determine if an employee is exempt or nonexempt. If an employee earns $455 or less per week or does not meet the exemptions listed above, he is automatically classified as nonexempt and is subject to FLSA regulations such as being paid an hourly rate no less than $7.25 per hour (or a state’s minimum wage, whichever is greater) and given no less than one and one-half times his regular rate of pay if working beyond 40 hours in a workweek.
Not paying those employees who work through breaks
Employers are not required to pay nonexempt employees for breaks over 30 minutes but rest breaks or breaks less than 30 minutes are compensable. So before you automatically dock hourly employees for a 30 or 60 minute meal break, make sure they are not working through their break or taking less than the allotted time. Also, check your time-keeping system to make sure that it does not automatically deduct for meal breaks.
Not combining hours for employees who work at different locations
If an hourly employee works at multiple locations but for the same employer, his hours must be combined and workers must be paid for all hours worked, not hours per location. This can have an effect on overtime so it is very important to keep track of total hours worked at all worksites.
Averaging hours worked during different weeks in a single pay period
Say a nonexempt employee works 30 hours during week one and then 50 hours the next week, can an employer average out the hours to get 40 hours per week since it was in the same pay period? No! You must pay the 10 hours of overtime acquired during the second week and cannot average the hours over those two weeks, resulting in no overtime pay.
Allowing employees to waive their right to overtime
Employers must pay nonexempt employees one and one-half times an employee’s regular rate of pay no matter if the employee waives his right to overtime or if you have policies prohibiting overtime or off-the-clock work. FLSA does not distinguish between approved and unapproved overtime so all hourly employees must be paid for all hours worked. This can include time spent making phone calls, answering emails, or even doing work related research on the internet. Some employers try to get around overtime by offering comp time but it is important to note that private sector employers are NOT permitted to offer nonexempt employees compensatory time off instead of paying overtime. Public agencies are allowed to implement comp-time practices but only under strict legal requirements and as long as there is an agreement made between the employer and employee.
FLSA provisions can be complex but there are a few things you can do today to help prevent or remedy FLSA mistakes. One, make it clear to nonexempt employees that you do not permit off-the-clock work, but if an employee does work overtime, even if unauthorized, they must be paid accordingly. Two, make sure you educate yourself and your employees about both federal and state labor laws and regulations. Three, make sure you apply your exemptions properly. Don’t just look at an employee’s job title but also look at their duties and day-to-day responsibilities. Lastly, make sure you keep diligent records about your employees’ status, hours worked, responsibilities, overtime paid, and more. The more information you have the better equipped you will be in case of a dispute. For more information about FLSA, please visit http://www.dol.gov/whd/flsa/ or check out our webinar, The FLSA: Avoiding Common Pitfalls and Costly Mistakes