FLSA: Innocent errors can lead to big trouble
November 12, 2008 by Bill MeltzerPosted in: Compliance, Fair Labor Standards Act, Special Report
There’s nothing sinister about most FLSA violations. Routine errors in record-keeping or communication breakdowns are the main causes.
But with a record number of FLSA being filed each year, i’s more important than ever to avoid these three easily made mistakes:
1. Breaks in the paper trail
The biggest mistake employers of all sizes make is to over-rely on time cards or time sheets to record hours for their non-exempt employees.
As Wal-Mart has learned the hard way in class-action suits that it has lost, FLSA requires all employers to record (and pay applicable overtime for) all off-the-clock work activities. In Wal-Mart’s case, courts ruled the wage-and-hour violations were a deliberate (and illegal) strategy for cutting OT costs.
More commonly, employers get tripped up because they lack a system for recording “borderline” work time spent by non-exempt employees. The errors need not be intentional to violate FLSA.
These errors can occur either on the front- or back-end of your compensation system.
The biggest front-end danger area: FLSA requires employers to log and pay for time non-exempt employees spend logging onto computers or donning safety equipment.
The second most common front-end error is lack of a tracking system for work-related travel time by non-exempts. The price is steep for non-compliance: One employer got hit by the DOL with a $72,664 fine for back wages and penalties because it failed to account for OT-eligible travel.
On the back end of record keeping, FLSA requires you to track total compensation (not just base pay) when calculating overtime. Case in point: An online recruiter failed to include the commissions and other bonuses it paid to non-exempt employees when figuring overtime pay rates. The damage: $524,216 in fines.
2. Faulty OT-authorization policies
What can do you to stop employees from working unwanted overtime? To many employers, the answer is, “Require employees to get supervisor approval before working overtime.”
That policy is OK under FLSA, but be careful how you apply and communicate it.
What you can’t do: refuse to pay someone for unwanted OT or dock pay in retaliation. Once it’s worked, you have to pay it. Under FLSA, your organization must pay even unauthorized OT in full.
What you can do: Create a written authorization procedure, and set disciplinary steps for its violation.
Supervisors (and, to a lesser extent, Payroll) will likely need education on their roles in this process.
The central message to get across: “Unwanted overtime is a thorny legal issue, due to FLSA. Never handle the case yourself – refer it directly to HR.”
3. Outdated job descriptions
Is your organization doing more with less these days? Have employees’ job responsibilities changed?
If so, their overtime-eligibility status may have changed, too.
Common example: Due to under-staffing, exempt employees perform clerical duties formerly delegated to hourly employees. Remember, a salaried employee isn’t automatically OT-exempt. You must still determine:
- if the employee spends 20% or more of the day on non-exempt tasks, and
- whether at least 50% of the day is still spent on primary job duties.
Tags: FLSA
November 14th, 2008 at 9:17 am
A co-worker is the Executive Assistant to the President, and the Human Resource Manager. At the same time he must still support the Administrative Offices, and he’s an exempt employee. This has been going on for at least six years.
November 14th, 2008 at 12:12 pm
We have a similar situation, I would also be very interested in hearing if this employee needs to be changed to non-exempt.
November 14th, 2008 at 12:13 pm
Pam, I’m sure that your situation is repeated throughout the country. When I started in HR I had an assistant. In the the past 15 years my compnay has doubled in size through a merger. My assistant was eliminated due to budgetary restraints. I have assumed all the duties of the assistant in addition to my exempt duties. When I ask about getting clerical help, I am told, “we can’t afford any help, you’re exempt. You do it!”
I wish I could get a list of what a “non-exempt” task is. Also as an exempt employee, my day is not an 8 hour day. 20% of an 8 hour day is 1.6 hours. 20% of a 16 hour day is 3.2 hours. I spend so much time printing forms, filing, responding to phone inquiries, setting up appointments / interviews / testing, conducting reference checks, entering data into databases, creating orientation packages, making ID cards, etc. There is no tracking of the time I spend on these functions. Some days I can spend very little, others it is all I do.
I no longer supervise anyone, yet I am responsible for all HR functions including data analysis, policy and procedure development and implementation, compliance with accreditation and government regulations, conducting interviews, conducting 90% of all employee and supervisor training, etc. There are times, when I see the entry level workers making more money than me when we both show up and leave at the same time. They get OT.
I enjoy my “exempt duties” and I am dedicated to the agency mission. I also know the reality that unless the agency is forced to change this by regulation or court decision, that the situation will remain the same.
November 14th, 2008 at 12:27 pm
I believe a determining factor is how closely the administrative duties for exempts are managed. In other words, if the employee does indeed do administrative tasks, is someone telling him/her exactly what to do, how to do it and when to do it? Are do they largely directe their own work and manage their own time in doing those administrative tasks?
Most managers do quite a bit of administrative work.
November 14th, 2008 at 5:04 pm
http://www.dol.gov/esa/whd/regs/compliance/fairpay/fs17a_overview.pdf
This is the website for executive, adminsitration, and professional exemptions from the dol. Hope it helps.
November 16th, 2008 at 10:10 am
This is more a question than comment. If a salaried employee works a 12-14hr day and is not paid OT can this employee or should this employee be entitle to comp time instead.
November 17th, 2008 at 10:56 am
In Response to Beth:
I would agree. However, if your supervision only meets with you annually for evaluations to tell you what didn’t get done or to criticize the manner you got things done, then I wonder if this applies. In my case, I spend a great deal of time doing administrative tasks. My office is a “war zone” and it takes at least twice as long to find things because I have to prioritize between conducting interviews and checks and training and disciplinary meetings and drug screenings, etc. The feedback I get is “your office is a mess.” Personnally, I would love to just spend the time to get the office cleaned up. I could save two hours a day. However, I’m also expected to be available to assist in “crisis” which occur twice a day at one of our programs.
To Douglas:
There is no requirement for “Compensatory Time Off” for exempt employees. It is really problematic for hourly employees. We use to have it, but several years ago it was done away with.
All full time staff are required to put in “at least 40 hours per week.” Put in less and the health benifits are threatened and there is discipline. Put in more and nobody pays attention. If you take PTO, you are required to put in the extra hours before or after to take the PTO.
November 24th, 2008 at 1:57 pm
If you have questions regarding qualifying as exempt or non exempt I suggest you read the laws. I say laws because for many of us we have both the federal statutes to comply with along with state statutes. Many times they are in conflict with one another. The rule of thumb here is to look at what is in the best benefit of the employee and go with that. It can be confusing but if you read what is written some of this becomes very clear, such as comp time programs, FLSA says no unless you are a government entity. If FLSA applies to you, which it may not, depending on a variety of factors, you can’t have an official comp time program. If you do have a comp time program you have to bank hours at your OT rate, ie 1.5 hours for each OT hour banked.
November 24th, 2008 at 3:00 pm
With all the money we and companies pay in taxes, I wonder why there isn’t a government agency where a company can submit a job description and get a ruling if it is exempt or not. Instead, there is no way to get a definitive decision until a complaint is filed and the DOL does it’s investigation.
For an Executive exemption- what is the measure for “particular weight in the definition “employee’s suggestions and recommendations as to the hiring, firing, advancement, promotion or any other change of status of other employees must be given particular weight?”
For an Administrative exemption- what is the measure for discretion, independent judgement, and matters of significance, in the definition “The employee’s primary duty includes the exercise of discretion and independent judgment with respect to matters of significance?”
For the Professional exemption- what is the measure for advanced knowldege, and what qualifies as a prolonged course of specialized instruction in the definition “The employee’s primary duty must be the performance of work requiring advanced knowledge, defined as work which is predominantly intellectual in character and which includes work requiring the consistent exercise of discretion and judgment; the advanced knowledge must be in a field of science or learning; and the advanced knowledge must be customarily acquired by a prolonged course of specialized intellectual instruction?”
For the Creative professional exemption- what is the measure for a recognized field of artistic or creative endeavor in the definition “The employee’s primary duty must be the performance of work requiring invention, imagination, originality or talent in a recognized field of artistic or creative endeavor?”
By the time you get any “clarification” from the department and check out all the “fact sheets” you find you just don’t know until you get a judgement that the position is NOT exempt. If the federal or state government wants compliance, they should be able to give a judgement BEFORE a complaint is filed. But that is not how the government works. If they didn’t levy fines, then how would they pay for their “decision making process?” The system is totally arbitrary with few true definititive standards.