NFIB

Nearly 400 NFIB members participated in an NFIB Small Business Legal Center webinar last month that guided employers through the basics of the Fair Labor Standards Act, the federal wage and hour law. The overwhelming number of participants was proof that wage and hour laws remain a continual source of frustration for small employers.  These laws, which include minimum wage and overtime rules, cover virtually every employer in the United States.

Failing to comply with wage and hour rules could cost you big bucks, and litigation statistics paint a dismal picture for employers. The U.S. Department of Labor estimates that 70 percent of employers are out of compliance with wage and hour laws, which helps explain why wage and hour lawsuits have tripled since 1997. In California, New York and Florida, wage and hour class claims are filed every day. And last year, DOL announced judgments and settlements in the millions against small businesses, which often have more exposure because they lack in-house legal teams or a dedicated human resources specialist. Consider the following cases:

• A New Orleans security company was assessed $185,385
• A small oil and gas firm in Houston owes $1.1 million
• A Las Vegas construction firm owes $1.2 million

Cases like these arise most frequently when employers miscalculate overtime.  To stay out of legal hot water, make sure your business avoids the following overtime myths:

1. Employees can 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.
2. 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. 
3. 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.
4. Contracting with employees to not give overtime.
   Employers must give any overtime compensation when earned and cannot contract around it. 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.
5. Paying overtime for work at night or on weekends.
   Extra pay for working weekends or nights is a matter of agreement between the employer and the employee. The FLSA does not require overtime pay for work at night, on weekends, holidays, or regular days of rest, unless overtime hours are worked on such days.  Beware that state wage and hour laws may provide different requirements.
6. Misclassification – 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.   
7. Delaying payment of overtime.
   Overtime must be paid as soon as practicable. For most employers, this means on the regular payday following when the overtime is worked. One of the few exceptions to this rule is when the correct amount of overtime cannot be determined until sometime after the regular pay period. But it is not an excuse that an employer has a limited or inefficient accounting system.

For more information on wage and hour laws, check out NFIB's Small Business Legal Center Fact Sheet on Calculating Compensable Travel Time (184 KB, PDF).

NFIB's Small Business Legal Center compliance webinars are designed to give you the nuts and bolts of laws impacting you every day. Each session lasts between 60 and 90 minutes and features experienced attorneys explaining in plain language how you can better run your business and, more importantly, avoid expensive fines and lawsuits. Webinars are free and available only to NFIB members. For a schedule of upcoming webinars, visit NFIB.com/legalwebinars.