NEWSLETTERS

Costly Mistakes under Overtime Laws

Now is a good time for companies to assess their compliance with the new overtime regulations under the federal Fair Labor and Standards Act (FLSA). Failing to catch overtime violations can expose the company to double actual damages (liquidated damages) for unpaid overtime for up to three years. It adds up fast!

For example, if 20 nonexempt employees are each owed 10 hours a week of overtime for three years, and their overtime rate is $20.00 an hour, then each employee is owed $200 a week OT or $200 x 20 = $4000. $4000 multiplied by 150 weeks (excluding 2 weeks paid vacation for each of the 3 years ) equals $600,000 actual unpaid overtime. Liquidated damages would double that amount to $ 1.2 million.

Additionally, the FLSA provides for mandatory payment of attorneys’ fees for plaintiffs who sue and prevail. In certain situations, criminal violations may also apply.

Top 10 most common mistakes involving non-exempt employees:

1. SET SALARY FOR ALL: Paying a set salary to an employee who performs non-exempt duties and not keeping track of hours worked (including overtime).
Such employees are entitled to be paid for overtime if they work
more than 40 hours in a workweek.

2. UNPAID BREAKS: Not paying for breaks or meal time that are 20 minutes or less.
Such breaks must be paid.

3. INSIDE SALES: Treating inside sales people as exempt employees.
Only outside sales has a specific exemption from overtime.

4. COMP TIME: Allowing private sector employees to take “comp time” (in a different workweek) in lieu of receiving overtime pay.
Generally, only federal, state or local government employees may receive comp time.

5. TEMP AGENCIES: Using temporary agencies who fail to pay non-exempt employees over- time.
Contracting out such labor may still expose companies to overtime violations.

6. UNAPPROVED OVERTIME: Failing to pay overtime when an employee does not obtain prior approval to work the overtime.
Although an employee may be disciplined for failing to receive approval, the employee must still be paid.

7. EXCLUDING BONUSES/COMMISSIONS FROM REGULAR RATE: Failing to calculate commissions and bonuses into a regular rate of pay before calculating the overtime rates.
Some exceptions apply for holiday/special occasion bonuses.

8. AVERAGING OVERTIME: Averaging hours worked over two or more weeks to avoid paying overtime.
Some exceptions exist e.g., nurses, fire fighters and law enforcement.

9. UNPAID TIME RELATED TO PROTECTIVE GEAR: Not paying for time related to “donning and doffing” protective gear or clothing while at a worksite.
A recent U.S. Supreme Court case has held that the time spent walking to work stations from the place where employees put on protective items must be paid and the days ends only after they take off the clothing.

10. UNPAID TRAINING MEETINGS: Not paying for required training programs, lectures and meetings.
The meetings must be included in hours worked. The additional meeting time may also trigger overtime. Buying lunch for non-exempt employees during a lunch meeting does not eliminate the requirement of paying them for the lunch meeting.

Keep in mind that the above top 10 violations are only the tip of the iceberg. If you have any concerns or questions about whether overtime is being properly calculated and paid, you should seek legal counsel who is familiar with the complex FLSA laws.

Copyright 2007

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