Are you an employer who pays employees for their work? Are you certain that you have accurately paid nonexempt employees for every minute they have worked? Are you certain that you have never incorrectly made a deduction from an exempt employee’s check when they didn’t work a full week? Well, congratulations if you haven’t, but you may very likely be in the minority. Unions, former Labor Secretaries, Democrat legislators, reporters and employees like to accuse employers of engaging in wage theft, but I have a problem with that term.
Are mistakes really theft?
I have found in my consulting career that much of the “wage theft” that has occurred is due to a misunderstanding of the Fair Labor Standards Act or just plain lack of knowledge of the specifics of the law. For example, many employers do not realize how overtime is calculated. Sure everyone knows that you pay time-and-a-half when a worker goes over 40 hours in the week. (This will vary by state law and jurisdiction). But what do you pay that overtime on? Many employers pay based on the base wage rate the employee is earning. If you hire someone at $10.00 per hour, many employers then assume the overtime rate is $15.00 per hour. And it may be, but it may also not be. What if during that week the employee is paid a $25 attendance bonus? That amount, because it is not discretionary, has to be calculated into the “regular rate” of pay. That alters the amount of overtime. The USDOL says that:
The regular rate includes all remuneration for employment except certain payments excluded by the Act itself. Payments which are not part of the regular rate include pay for expenses incurred on the employer’s behalf, premium payments for overtime work or the true premiums paid for work on Saturdays, Sundays, and holidays, discretionary bonuses, gifts and payments in the nature of gifts on special occasions, and payments for occasional periods when no work is performed due to vacation, holidays, or illness.
Then there is the whole confusing area of who is even eligible for overtime. Many employers think that just because they pay a salary they don’t have to pay overtime. That is incorrect, there is a whole category of nonexempt salaried employees. If you make a mistake on how someone is classified is that really wage theft?
As I was doing some research I came across a blog post by my friend Jon Hyman who said that what is missing from all these outcries against wage theft is INTENT. I agree with Jon. My clients have not intended to short-change their employees. Are there employers who do so? Absolutely, as I wrote about in This is the kind of business owner that cartoons lampoon and employees hate. These people should have the book thrown at them, but they are not the majority of employers. Wage theft accusations are a broad brush that paints employers unjustly in most cases.
Should corrections be made when an employer finds out they have made mistakes? Absolutely! But some forgiveness needs to be given for an honest mistake.