With the increasing emphasis the U.S. Department of Labor has been putting on errors in the application of the Fair Labor Standards Act (FLSA) it is important to understand how you may go wrong. Here are 5 of the most common wage and hour mistakes many employers make.
Number 1: Not recording actual time worked
The USDOL is very specific in what time should be recorded for nonexempt employees. They want ALL time an employee works to be recorded. If an employee must don protective gear for the performance of their jobs they must be compensated. These are called the “donning and doffing” rules that say preparatory and concluding activities that are integral to their jobs are to be compensated. You can learn more by reading A VERY EXPENSIVE Lesson in NOT Following the Rules. Travel time is even more problematic. Putting a non-exempt employee on an airplane can be very confusing. I provide some guidance in this previous blog post. Clearing Up Travel Time for Non-exempt Employees
Number 2: Not paying for breaks and meals
Lunch breaks for non-exempt employees can cause employers all kinds of problems. Many time recording systems have automatic deductions for the standard lunch period. The problems arise when the employee does not take that lunch. Or if the employee eats at their desk and answer emails or the phone then they have not been fully relieved and the time is compensable. Systems that automatically deduct need to be monitored.
Those morning and afternoon breaks that are in most employees’ workday must be paid, unless the break is extended beyond the normally allotted time, as long as the employee has expressly and unambiguously told they cannot do that. Generally that communication has not been documented. Here is some further guidance on that subject. Breaks, Meal Times and the FLSA
Number 3: Having employees work off the clock
Many supervisors have the pressure of controlling payroll costs yet accomplishing the work that needs to be done. So how do they do it? They imply that the employee needs to work but be “off the clock” when doing so. This is expressly illegal. Sometimes employees voluntarily work off the clock in order to accomplish work even though they know that any overtime needs to be authorized. Supervisors finding out that unauthorized overtime was performed often refuse to pay for it. That is expressly illegal. Here is some additional guidance for this situation. Pay Attention Managers: You have to track time ACTUALLY WORKED!
Number 4: Improperly classifying someone as Exempt
Much of American business operates under the misconception that employee classifications consist of “hourly” versus “salaried.” The bad news is that these are not classifications they are methods of paying employees. Yes it is true that an exempt employee MUST be paid a salary to be considered exempt, but there are non-exempt employees who can also be paid a salary. Exemption has to do with eligibility for earning overtime. A non-exempt employee is eligible for overtime pay, an exempt employee is not. This is determined not by how the person is paid, but rather by the person’s job duties. The FLSA sets specific standards that have to be met before someone can be considered exempt. Absent meeting those standards the employee is considered to be non-exempt and must be paid overtime for hours worked that exceed 40 in a week. You can find further guidance here. Powerpoint presentation explaining Executive, Administrative and Professional Exemptions under the FLSA
Number 5: Calling an employee an independent contractor
I cringe every time I hear the term “1099 employee.” They do NOT exist for the most part. There is an IRS category called “statutory employee” that provides limited exceptions. An independent contractor is someone the employer does not exercise behavioral control or financial control and with whom they have a well-defined relationship, as in there is a contract. The IRS and the USDOL are going to be cracking down on independent contractor classifications because, to use an old phrase, “…thar is gold in them thar hills.” Many back taxes and fines can be collected as a result of revealing improper classifications. More guidance can be found in The IRS and HR: Who is an Employee?
Do a quick check
You need to do a quick check on your compliance with the FLSA and make sure you are not making these five mistakes. The government is looking for money and they are discovering that FLSA charges are an easy source.