Overtime is a hot-button topic in today’s workplace. Worse, it has also become a prime target area for plaintiffs’ attorneys. Unfortunately, certain misconceptions about wage and hour compliance persist, and many employers unwittingly make mistakes that expose them to unplanned back wages and legal fees.
Under the Fair Labor Standards Act (FLSA), and some states’ laws, employees who work more than 40 hours in a workweek are entitled to overtime pay, unless they fall within one of the statutory exemptions. So what should you do if you get an employee complaint about unpaid overtime?
- have the employee properly classified as “exempt” or “non-exempt”
- check the employee’s time records
- make sure that the employee is not working off the clock
- consult with legal counsel when correcting any problems you find
- train your managers on wage-hour compliance
- tell the employee that you’ll allow “time off next week to even things out”
- tell the employee they won’t get paid
- tell the employee to leave if they don’t like it, or fire them for complaining
- pay or promise to pay a cash bonus instead if they keep quiet
- deduct anything from their overtime pay
One of the biggest FLSA mistakes is classifying an employee as exempt, making the employee ineligible for overtime, when the employee is really non-exempt. Minimum wage and overtime rules apply to non-exempt employees. Exempt employees are not entitled to overtime pay, but not all salaried employees are exempt. To be exempt, an employee must be salaried and meet the requirements of a specific exempt classification.
The most common exemptions are available for executive, administrative, professional, computer, and outside-sales employees. However, simply labeling an employee an “administrator” or an “executive” does not create an exemption. For FLSA purposes, it does not matter what an employee is called—the FLSA is concerned with what the employee does. Properly classifying employees is half the battle of all FLSA issues. Be vigilant about conducting classification audits and understand the FLSA's criteria in detail.
You must ensure that all non-exempt employees properly record all time worked and are properly paid for that time. Check all time records for repetitive starting and stopping times, for hours worked mirroring only scheduled or expected hours, and unexplained additions to or subtractions from work time.
Is training and travel time included? Are break times during which employees are not completely relieved from duty included? If employees use a BlackBerry, iPhone or other PDA to check or send e-mails or make business-related phone calls outside of “normal” working hours, that may also be compensable work time. Note, however, paid holiday, sick and vacation time do not count as “hours worked.”
Employees must be paid for all hours worked. This includes time spent working before and after designated work hours. Watch out for non-exempt employees who work through an unpaid lunch break or who take work home to “get caught up” or to “get ahead.” Be cautious of any employee arriving early or staying late “off the clock” even if to perform daily minutia. Although their initiative should be praised, make it clear that no extra work should be done that is not properly recorded. Managers should be trained not to turn a blind eye to employees working off the clock, no matter how good their intentions.
Quickly and carefully correct a problem after consulting with employment counsel. Wage-and-hour collective action lawsuits brought by current or former employees under the FLSA have become a source of massive concern for employers over the last several years, and with good reason. An FLSA collective action lawsuit allows a single employee to file a claim on behalf of not only themselves, but also all other “similarly situated” employees. Doing so dramatically increases both the scope of potential liability and litigation costs for employers who have been targeted with such claims. It is, therefore, critical to obtain legal advice as soon as possible after you get an employee complaint to identify and minimize your possible exposure.
Managers who are trained properly are less likely to commit FLSA violations, which means that your company is less likely to be targeted. Further, the FLSA treats honest mistakes differently than it treats willful disregard for the law, and training may be considered by courts to be an attempt to comply in good faith with the law. In some cases, managers can be held personally responsible for FLSA overtime violations, so they also have a vested interest in compliance.
There’s no such thing as “comp time” for non-exempt employees in the private sector, so don’t tell an employee they’re going to get some time off next week for working extra this week. A 50-hour workweek and a 30-hour workweek are not the same as two 40-hour workweeks—even if you have a two-week pay period. (However, an employee who works long hours on some days in the workweek can be sent home early on later days in the same workweek, so that the total hours actually worked that week do not exceed 40 hours.)
Whatever you do, don’t tell the employee that because the worked overtime hours were not pre-approved, they won’t get paid for them. Under the FLSA, an employer must pay non-exempt employees for all time that the employer “suffers or permits” the employee to work. Even if you have a strict policy of no overtime without prior permission, the employee ignores the rule and performs work, and you become aware of it—you can discipline the employee—but you still have to pay the employee for the time.
The FLSA prohibits employers from retaliating against employees who file complaints under the statute. And if the employee is complaining on behalf of other employees as well, taking an adverse action against the employee in retaliation for the complaint could also violate Section 7 of the National Labor Relations Act.
Employees cannot waive their rights under the FLSA in the absence of approval by a court or the Department of Labor. So, even if the employee agrees, you can still be held liable for failure to comply with the FLSA (and wage reporting laws).
It’s important that you don’t tell an employee that they owe you or the company money because they damaged or used company property, or you had a cash shortage. You cannot offset any part of an employee’s overtime pay for tools, equipment, supplies, mileage costs, shortages, uniforms, unreturned property, etc.
It is important to know which employees are eligible for overtime pay and to review your company’s policies. Properly training managers and tracking hours will help to mitigate risks involving overtime complaints. When dealing with these issues and the FLSA, it is also a good idea to consult with an attorney who focuses on handling labor and employment law matters.