No doubt, most employers have a battle with the Fair Labor Standards Act (FLSA), which establishes the standards for how to pay their employees. The FLSA governs overtime pay, the minimum wage, and child labor. Many are simply unaware of the maze of requirements.
Some try in good faith to act in accordance with the law but fall short, and a few simply ignore the Act, hoping that nothing comes back to bite them. But ignorance of the law is not bliss…or an excuse.
FLSA enforcement by the Department of Labor’s Wage and Hour Division recently recovered just shy of $250 million in back wages, with 269,250 employees receiving back wages. Another interesting fact is that the average days to resolve a complaint is 110. This means the Wage and Hour people are very interested in the way you pay your employees and even enjoy perusing your records.
Here are six ways (and believe me, there are many more) in which you could find the DOL knocking on your door:
Mistake #1: Misclassifying Employees
Nearly every employer must decide which positions are considered nonexempt under the law and must be paid overtime (for hours worked beyond 40 in a workweek), and which positions are exempt from overtime. The FLSA establishes overtime pay requirements by outlining a series of tests that qualify employees as exempt from overtime and minimum wage requirements in these categories: executive, administrative, professional, outside sales, and certain high-level computer positions.
Mistake #2: Thinking, “If I make everyone ‘Salaried,’ I won’t have to pay overtime!”
Genius, not. Be careful. “Salaried” is not equivalent to “exempt.” An employer must satisfy an FLSA job duties test mentioned in number 1. Remember too, that job positions should be reviewed regularly to ensure they still meet the requirements of nonexempt or exempt as the position requirements may change.
Mistake #3: Failing to Pay Nonexempt Employees for Unauthorized Work
If a company “allows” employees to work, they must pay for this time and include it as “hours worked” for overtime purposes. When an employee who begins work early, stays late, takes work home, or works through the lunch break without authorization to do so, must be paid for unauthorized work (even if the company has a policy prohibiting it). The employee, though, may be subjected to disciplinary action for violating the policy.
Mistake #4: Asking Nonexempt Employees to “Work Off the Clock”
More recently, asking an hourly employee to “work off the clock” is considered wage theft. The FLSA requires employers to keep accurate time records. Tight budgets often prompt managers to request that employees “work off the clock” by asking them to come in early or stay late and not compensating them. Such a practice can create huge liabilities for an organization.
Mistake #5: Prohibiting Employees from Discussing Compensation Issues
Although many employers prefer that compensation rates and other pay issues remain private and even write policies to that effect, forbidding such discussion by employees may be in violation of the law. The National Labor Relations Act (NLRA) prohibits employers from banning wage discussions as it is interpreted as interfering with employees’ right to engage in protected concerted activity. The National Labor Relations Board, the government agency that enforces the NLRA, has been watching these actions closely, especially with the more prevalent use of social media.
Mistake #6: Failing to Properly Pay Nonexempt Employees for Meetings and Training
This is a puzzling one for many employers – knowing whether or not they are required to pay for meetings and training sessions. Attendance at meetings and training is not counted as “hours worked” if all four of the following criteria are true:
- Attendance is outside of the employee’s regular work hours;
- Attendance is truly voluntary;
- The course, lecture, or meeting is not directly related to the employee’s job; and
- The employee does not perform any productive work while attending.
Attendance is not considered voluntary, however, if the employee believes that his working conditions or employment opportunities would be adversely affected if he did not attend.
Even the most experienced HR professionals have difficulty navigating the FLSA. However, failure to do so can be costly in terms of dollars, time spent fixing problems, bad publicity, and lower employee morale. Focusing on a few of the most common FLSA mistakes and steering your organization away from them is definitely time well spent.
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