With the FLSA being so prominent in the news as we await the final revision on new regulations on exempt employees I thought I would republish this post on mistakes companies make with overtime.
CNN Money published a list of the top 10 industries that violate the overtime provisions of the Fair Labor Standards Act. These industries include full service restaurants, fast food restaurants, janitorial services, day care, hotels and motels, convenience stores, nursing homes, security services, grocery stores and doctor’s offices. Many of these are franchises, smaller companies, single owner locations or locations that have little oversight by an HR department. Here are some of the violations these industries have been charged with and thus made to pay.
Violation 1- Paid only straight time for all hours work.
The FLSA states that all non-exempt employees that work more than 40 hours in a week must receive overtime based upon their “regular rate of pay”, which is not always equal to their state wage rate for straight time. (See here for a great explanation.) Some of these industries had people working 65 hours a week or more and not getting paid a cent in overtime.
Violation 2- Working in two different offices during a week but hours not combined.
If an employee works for one employer but happens to spend time in two different offices the company may be tempted to pay the employee out of different accounts. Since in most cases the employee is not going to have worked more than 40 hours in either location neither will then pay overtime. Sorry Mr. Employer, it doesn’t work that way. That employee is working for one employer and is working overtime. Pay up. There are situations where the employees are working different jobs at different rates and that is ok, but you still have to calculate overtime based on the blended rate and pay at 1.5 x the hours worked over 40.
Violation 3- Automatically deducting for a meal period, even when not taken
The beauty of having a time system is that it relieves supervisors of the responsibility of keeping track of time worked. The bad thing about that system is that it is not artificial intelligence (not yet anyway) and it does not know if the employee actually took the lunch. The FLSA states that you can only deduct for a meal period of 30 minutes or more when the employee is FULLY RELIEVED of their duties. If they are not, and the time system deducts for that time you are violating the FLSA by not paying for time worked. And if they are actually working then that kicks them into an overtime situation typically.
Violation 4- Working off the clock
This one happens even in big companies. Supervisors or owners are pinching pennies and don’t want to pay overtime, yet the work is not done at the end of regular time. So either by relying on the good graces of employees or by intimidation tell the employee to clock out and then to return to finish the work. Sorry, can’t do this.
Violation 5- Paying by the room
This was a violation by hotels and motels where they paid their housekeeping staff by the room cleaned. This was essentially a piece-rate type of system and is not really a violation of overtime, though it could be, it was more of a violation of minimum wage rules. It is fine to pay employees on a piece-rate or flat-rate type of system as long as the end result is that they are earning minimum wage for the number of hours they are working. Tipped-rate employees are the same way. If the restaurant was slow and the servers did not make enough in tips to bring their hourly wage up to the current minimum wage the employer has to make up the difference.
I have just really covered the bare bones here and have only concentrated on Federal law. Many states have different overtime and minimum wage provisions, so you need to pay attention to the locale in which you do business. Back payment of wages for many of these companies resulted in amounts of $131,000; $273,000; $544,900; $138,000; with a couple getting away for just $64,000 and $41,000. You want to write one of these checks to the Department of Labor?
A special word to franchisors, you need to make sure your franchisees understand these rules. When employees complain and it makes the news it is the company name that gets dragged through the mud and not the franchisee’s name.
Image courtesy of Stuart Miles / FreeDigitalPhotos.net