Seven FLSA Pitfalls to Avoid
There is hardly a week that goes by without reading a report from the U S department of Labor that a company has been cited for violating FLSA regulatory requirements. To help organization comply with FLSA, the following pitfalls to avoid are discussed below.
We Are a Small Organization Not Covered By FLSA
The FLSA does not depend directly upon the number of employees. The FLSA covers individual employees whose work affects interstate commerce, and this apply to all employees working for an employer that is covered as an enterprise that is involved in interstate commerce. The U.S. Department of Labor, DOL and the courts have attached broad meaning to the term "interstate commerce". The Fair Labor Standards Act provides two different ways for coverage to apply:
1.Individual coverage - an individual whose work affects interstate commerce is covered as an individual - "interstate commerce" is defined so broadly that practically anything fits, such as ordering, loading, or using supplies from out of state, accepting payments from customers based on credit cards issued by out-of-state banks, and so on
2.Enterprise coverage- for most businesses, enterprise coverage applies if the business is involved in interstate commerce and the gross annual business volume is at least $500,000 - in that case, all employees working for the business are covered
1.coverage is automatic for schools, hospitals, nursing homes, or other residential care facilities
2.coverage is also automatic for all governmental entities at whatever level of government, no matter how big or small
3.coverage does not apply to certain entities that are not organized for a business purpose, such as churches and eleemosynary institutions
By implication, practically anything in connection with our modern, networked economy is going to be sufficient to be considered involvement in interstate commerce. The vast majority of businesses can save a lot of time and legal expenses by going ahead and assuming they and all their employees are covered under the FLSA.
Managers Are Exempt- Salaried
Employers should not make the mistake of assuming that simply because an employee is paid a salary, or is called "salaried" or "exempt", or has a high-ranking job title, the employee will be considered exempt from overtime pay. Many non-exempt employees are paid a salary, such as receptionists, secretaries, file clerks, and technicians. In a similar vein, giving an employee a high- ranking job title such as "director of production" or "sales manager" will make no difference, if the employee's job duties do not satisfy the criteria found in the DOL's "duties" test for an exemption category. DOL will look right past what a person is paid or called, and focus on the nature of the job and how the employee does the job.
The Salary We Pay Covers All the Hours Worked
To assume that paying an employee a fixed salary that is meant to cover both straight-time and overtime pay will be sufficient to meet the overtime pay requirements is a mistake that should be avoided. Regardless of the amount of the salary, and whether the employee agrees that the salary covers both overtime and non-overtime hours, the DOL and the courts will rule that the employer owes extra overtime pay, since the salary at most can cover only straight-time pay for all hours worked.
Employees Volunteer for Extra Time
There is no such thing as "voluntary unpaid overtime" or "donated" time under the FLSA. Any manager who expects or allows his or her staff to put in unrecorded work time, otherwise known as working "off the clock", is a wage claim or lawsuit waiting to happen. It is simply impossible under the FLSA for an employee to waive the right to receive at least minimum wage and applicable overtime pay for all hours worked. An agreement to the contrary other than a wage claim settlement supervised and approved by the DOL is null, void, and completely unenforceable. Employers must ensure that all non-exempt employees properly record all time worked and are paid for all such time.
Employee Maintains Their Time Records
This practice clearly violates FLSA record keeping requirement. The regulations require employers to maintain detailed records of hours worked by each non-exempt employee. An employer that allows employees to keep their own time records is only asking for trouble. For instance, if an employee files a wage claim for unpaid overtime, and the employer has no time records to dispute the employee's own records showing that overtime was worked, the DOL and the courts will accept the employee's records as valid under what is known as the "best evidence" rule, unless there is a good reason to doubt the credibility of such records. Another problem will occur if the DOL audits the employer for compliance with the FLSA; part of any compliance audit is an inspection of the required records, and non-existent records may be cause for further DOL action.
We Give Employee Compensatory Time Off, So We Do Not Pay Overtime
Government employees can use compensatory time off, but private sector employers cannot use compensatory time off. Private employers can use an informal variety of compensatory time by adjusting the schedule within the same workweek to ensure that total hours worked do not exceed 40. However, overtime hours may not be averaged out over a longer period of time except in exceedingly narrow cases of certain employees of residential care facilities, and in the case of certain police, firefighting, and EMS employees. Otherwise, any overtime worked within a workweek must be paid for that workweek.
We Use Contract Labor Hence We Do Not Pay Overtime
While it is true that independent contractors are not classified as employee and hence do not get to receive overtime pay. The problem occurs when an employer fail to understand that an Independent contractor status does not depend upon the existence of a contract specifying that the worker is an independent contractor, or upon what the parties might call the relationship, but rather on the underlying nature of the work relationship. Some employers hire temporary workers to help them with a rush period and think that they are "contract labor" or "contract employees", when in reality such terms are practically meaningless under wage and hour laws and payroll tax laws. If such workers are truly employees, and they work more than 40 hours in a workweek, the employer must pay them overtime pay if they do not qualify for some sort of overtime exemption. There is no way to contract around that; no piece of paper and no amount of explanation will overcome the evidence of an employment relationship if the DOL or the IRS, or a state employment security agency, is examining the situation.
[http://www.workplace-weekly.com/2011/11/07/seven-flsa-pitfalls-to-avoid-special-report/]
We Are a Small Organization Not Covered By FLSA
The FLSA does not depend directly upon the number of employees. The FLSA covers individual employees whose work affects interstate commerce, and this apply to all employees working for an employer that is covered as an enterprise that is involved in interstate commerce. The U.S. Department of Labor, DOL and the courts have attached broad meaning to the term "interstate commerce". The Fair Labor Standards Act provides two different ways for coverage to apply:
1.Individual coverage - an individual whose work affects interstate commerce is covered as an individual - "interstate commerce" is defined so broadly that practically anything fits, such as ordering, loading, or using supplies from out of state, accepting payments from customers based on credit cards issued by out-of-state banks, and so on
2.Enterprise coverage- for most businesses, enterprise coverage applies if the business is involved in interstate commerce and the gross annual business volume is at least $500,000 - in that case, all employees working for the business are covered
1.coverage is automatic for schools, hospitals, nursing homes, or other residential care facilities
2.coverage is also automatic for all governmental entities at whatever level of government, no matter how big or small
3.coverage does not apply to certain entities that are not organized for a business purpose, such as churches and eleemosynary institutions
By implication, practically anything in connection with our modern, networked economy is going to be sufficient to be considered involvement in interstate commerce. The vast majority of businesses can save a lot of time and legal expenses by going ahead and assuming they and all their employees are covered under the FLSA.
Managers Are Exempt- Salaried
Employers should not make the mistake of assuming that simply because an employee is paid a salary, or is called "salaried" or "exempt", or has a high-ranking job title, the employee will be considered exempt from overtime pay. Many non-exempt employees are paid a salary, such as receptionists, secretaries, file clerks, and technicians. In a similar vein, giving an employee a high- ranking job title such as "director of production" or "sales manager" will make no difference, if the employee's job duties do not satisfy the criteria found in the DOL's "duties" test for an exemption category. DOL will look right past what a person is paid or called, and focus on the nature of the job and how the employee does the job.
The Salary We Pay Covers All the Hours Worked
To assume that paying an employee a fixed salary that is meant to cover both straight-time and overtime pay will be sufficient to meet the overtime pay requirements is a mistake that should be avoided. Regardless of the amount of the salary, and whether the employee agrees that the salary covers both overtime and non-overtime hours, the DOL and the courts will rule that the employer owes extra overtime pay, since the salary at most can cover only straight-time pay for all hours worked.
Employees Volunteer for Extra Time
There is no such thing as "voluntary unpaid overtime" or "donated" time under the FLSA. Any manager who expects or allows his or her staff to put in unrecorded work time, otherwise known as working "off the clock", is a wage claim or lawsuit waiting to happen. It is simply impossible under the FLSA for an employee to waive the right to receive at least minimum wage and applicable overtime pay for all hours worked. An agreement to the contrary other than a wage claim settlement supervised and approved by the DOL is null, void, and completely unenforceable. Employers must ensure that all non-exempt employees properly record all time worked and are paid for all such time.
Employee Maintains Their Time Records
This practice clearly violates FLSA record keeping requirement. The regulations require employers to maintain detailed records of hours worked by each non-exempt employee. An employer that allows employees to keep their own time records is only asking for trouble. For instance, if an employee files a wage claim for unpaid overtime, and the employer has no time records to dispute the employee's own records showing that overtime was worked, the DOL and the courts will accept the employee's records as valid under what is known as the "best evidence" rule, unless there is a good reason to doubt the credibility of such records. Another problem will occur if the DOL audits the employer for compliance with the FLSA; part of any compliance audit is an inspection of the required records, and non-existent records may be cause for further DOL action.
We Give Employee Compensatory Time Off, So We Do Not Pay Overtime
Government employees can use compensatory time off, but private sector employers cannot use compensatory time off. Private employers can use an informal variety of compensatory time by adjusting the schedule within the same workweek to ensure that total hours worked do not exceed 40. However, overtime hours may not be averaged out over a longer period of time except in exceedingly narrow cases of certain employees of residential care facilities, and in the case of certain police, firefighting, and EMS employees. Otherwise, any overtime worked within a workweek must be paid for that workweek.
We Use Contract Labor Hence We Do Not Pay Overtime
While it is true that independent contractors are not classified as employee and hence do not get to receive overtime pay. The problem occurs when an employer fail to understand that an Independent contractor status does not depend upon the existence of a contract specifying that the worker is an independent contractor, or upon what the parties might call the relationship, but rather on the underlying nature of the work relationship. Some employers hire temporary workers to help them with a rush period and think that they are "contract labor" or "contract employees", when in reality such terms are practically meaningless under wage and hour laws and payroll tax laws. If such workers are truly employees, and they work more than 40 hours in a workweek, the employer must pay them overtime pay if they do not qualify for some sort of overtime exemption. There is no way to contract around that; no piece of paper and no amount of explanation will overcome the evidence of an employment relationship if the DOL or the IRS, or a state employment security agency, is examining the situation.
[http://www.workplace-weekly.com/2011/11/07/seven-flsa-pitfalls-to-avoid-special-report/]