Claiming that your employees are exempt from overtime is about to become much more difficult with release of new regulations this week by the U.S. Department of Labor (“DOL”) under the Fair Labor Standards Act (“FLSA”).
On June 29, 2015, President Obama announced that the DOL is issuing proposed rules that will probably go into effect in early 2016. Those proposed rules redefine which employees have to earn overtime on their hourly pay instead of being paid as an exempt salaried employee.
The result could be skyrocketing overtime costs and more frequent wage and hour suits against companies that fail to make this transition carefully.
The advantage for an employer of an FLSA exemption has always been that the employer doesn’t have to track that employee’s hours and doesn’t have to pay overtime wages of 1.5 times the hourly rate for anything over 40 hours worked in one workweek. That advantage will no longer be available to you as an employer in 2016 for those employees you pay less than $970 per week, which adds up to $50,440 per year. Continue reading Salary Basis for FLSA Exemptions Raised Dramatically
In the last three or four years, there have been several cases filed against employers by nonexempt (hourly) employees who claimed they worked more hours than they were paid for because they checked their work email accounts at home in the evening or they remotely accessed their work files and sent a document to a client or answered a supervisor’s questions after hours. Technology has made this type of work easy and acceptable, but it also has made us as employers sloppy about our pay practices.
Applying the Fair Labor Standards Act, which regulates overtime and minimum wages, has never been easy, but when an employee showed up at the office, punched a time clock at the beginning of the work day and again at the end, paying that employee correctly was simpler. Nowadays, smartphones, flash drives, remote log-ins, texts, etc., have added a new layer of compliance issues to the FLSA. And attorneys who represent employees in wage and hour lawsuits are taking advantage of the complexity by bringing collective (class) actions against employers for failing to capture and compensate for the time employees spend using all of that technology outside of the office. These cases are very expensive because they court will always award the employee(s) two times their damages plus attorneys’ fees that often greatly exceed the damages.
Don’t stick your head in the sand on this issue and just hope you never get sued. At a minimum, you need a policy in writing addressing these issues. Tell your nonexempt employees that you never want them working “off the clock” and that you will pay them for any after hours work they perform. Let your employees know whether this kind of out of the office work is acceptable, or if not, be prepared to discipline your employees for performing it (but still pay them for it).
As it routinely does, the United States Department of Labor recently released to the media a report of another Texas employer who had to pay back wages to current and former employees for overtime violations. This time the company was Porter Ready Mix Inc., in Porter, Texas and the amount was $173,863. But it could have been almost any employer because the overtime laws are very difficult to understand and follow. The DOL gets more than 26,000 complaints a year and collected $224 million in back wages in fiscal year 2011. Some of its favorite targets are restaurants, construction companies, agriculture, hotels, healthcare providers, landscapers, preschools and other industries that pay lower wages, but no employer is immune. Porter Ready Mix’s mistake? It paid gravel truck drivers by the trip instead of by the hour.
If you as an employer are paying any employee in any manner other than by the hour and paying time and one-half for all hours over 40 worked in one week, you too could be facing a Department of Labor investigation soon. Paying employees by the day, by the trip, by travel time, by commission, by tips, by bonus, by incentive, even by weekly salary can put you in the hot seat. Salaried employees must fall into one of four or five narrow categories to be exempt from overtime. Many employers put employees on salary or another pay scheme without doing any analysis of whether failing to pay overtime is legal based on that particular employee’s job duties.
Don’t rely on your instinct, your competitors, your experience, your employee’s desires or any other resource other than the Fair Labor Standards Act when you set compensation for a new employee or when you are reviewing your current staff compensation. Do your research before you pay any employee on any basis other than hourly plus overtime.