In January, nearly 100 small businesses participated in a NFIB webinar that guided employers through the Fair Labor Standards Act, the federal wage and hour law. This law, which includes minimum wage and overtime rules, covers virtually every employer in the United States. With the Obama administration’s emphasis on protecting employees’ rights, there’s even more incentive to make sure that your business hasn’t run afoul of wage and hour rules.
To avoid penalties or claims from disgruntled employees, Elizabeth Milito, from the NFIB Small Business Legal Center, advised businesses to avoid the following wage and hour traps:
Allowing employees to waive their right to overtime pay.An employee may not waive his right to overtime pay. Even if an employee is instructed to only work 40 hours per week, any hours actually worked over 40 hours in a 7-day workweek will be subject to overtime pay. An employer can, however, instruct an employee to work no more than 40 hours per week, and generally may discipline an employee who works unauthorized overtime.
Averaging the hours worked over two weeks.Even though the employer uses a two-week pay period, the FLSA treats each workweek as a single unit. If an employee works 42 hours in one week, the employee must be paid the two hours of overtime, even if the employee only works 20 hours in the subsequent week.
Giving compensatory time instead of cash.The FLSA is very biased in favor of cash compensation rather than “comp time.” Neither the employer nor employee can agree to or insist on comp time in lieu of overtime pay.
Treating all salaried employees as exempt.Being a salaried employee is not sufficient to classify an employee as exempt. Additionally, neither job title nor job description is sufficient. Employers must be careful to ensure that employees are properly classified. Exempt employees must meet a certain minimum salary and fall under a certain exemption category specified by the FLSA.
Docking exempt employees’ pay.An exempt employee must be paid on a salary basis. This means that the employee on a weekly or less frequent basis receives a predetermined amount of pay, which is not subject to reduction. If you make improper deductions from an exempt employee’s salary, the salaried basis of payment is destroyed and the exemption is lost. Don’t jeopardize the exemption. Make sure the exempt employee’s pay is the same every week, regardless of hours worked. In other words, if an exempt employee shows up for part of a workday, you must pay him for the whole day.
NFIB's webinars are designed to give you the nuts and bolts of laws impacting you every day. Webinars are FREE. For a schedule of upcoming webinars, go to www.nfib.com/webinars.
Updated February 2, 2012