Did you know that you may be unintentionally violating the law? That’s right. The basic rules on paying minimum wage and overtime are set by a federal law called the Fair Labor Standards Act, or FLSA for short. However, some of the most common pay practices can cause you to fall out of compliance with the law.
Before we begin, a quick note about the importance of state wage and hour laws... when both the FLSA and a state law apply, the law setting the higher standards must be observed, so be sure to check your state's laws and ask an employment law attorney if you have any questions regarding your responsibilities.
Now, let’s take a look at some common mistakes under the FLSA. Do any of these statements sound familiar?
Despite common perceptions, salaried does NOT necessarily mean exempt. Never assume that, just because you pay your employees a salary, they are not entitled to the FLSA minimum wage and overtime pay protections. Similarly, giving an employee a high-ranking job title such as "manager" does not, by itself, determine the employee's status. In order for an exemption to apply, an employee's specific job duties and salary have to meet all the requirements for the exemption claimed.
No matter how loyal or diligent they are, non-exempt employees may not be allowed to work for free. They must be paid for ALL hours worked, including time spent doing work not requested by the employer but still allowed. These “off the clock” tasks might include, for example, an employee staying late to finish waiting on a customer or taking work home in the evening to meet a deadline. Remember, even if an employee volunteers to perform the work, you must, in most cases, count his or her hours as compensable time. It’s your responsibility as a manager to exercise control and make sure that extra work is performed only with your consent.
While it is true that independent contractors are not entitled to overtime pay because there is not an employment relationship under the law, the existence of a contract alone is not enough to determine a worker’s status. As a manager, you must analyze the underlying nature of each work relationship to ensure that your employees are properly classified. There is no single rule or test for determining whether an individual is an independent contractor or an employee for purposes of the FLSA. Some of the relevant factors to consider include the nature and degree of control exercised over the worker, the permanency of the relationship, and the amount of the worker's investment in facilities and equipment. Visit the U.S. Department of Labor's website to learn more about these and other factors to help you make the right call.
Of course, these are just a few examples. The rules governing classification and payment of employees are quite detailed. But if any of the preceding statements apply to your company, it’s a good sign that it’s time for a compliance evaluation. And…depending on your state…remember that specific wage and hour laws may also apply. That’s why it’s always a good idea to consult a knowledgeable employment law attorney if you have any uncertainties.
Take a major step towards protecting your business by downloading our easy-to-understand HR compliance checklist today!