Employment Law, Payroll Management

Unpaid overtime and damages – How can businesses stay in compliance?

Nov 3, 2014

This past summer LinkedIn was highlighted by the Department of Labor. If you missed the story, a quick recap of their investigation – LinkedIn failed to record, account and pay for all hours worked in a workweek. The investigation led to nearly $6M in back wages and damages. The company had violated the overtime and record-keeping provisions of the Fair Labor Standards Act. While reading about LinkedIn’s case, I came across a poll conducted of lawyers that revealed employment law claims were rated as one of the fastest growing fields of law today. Why? Because employment law claims, and in particular FLSA claims, are increasing in terms of the number of cases filed, verdicts awarded and penalties assessed.

The Wage and Hour Division takes unpaid overtime wages seriously. They enforce Federal minimum wage, overtime pay, record keeping and child labor requirements of the FLSA. Overtime pay at a rate of not less than one and one-half times their regular rates of pay is required after 40 hours of work in a workweek. Although certain classes of employees are exempt from the FLSA requirements, most employees are entitled to be paid overtime. Understanding the basics of the FLSA is more important now than ever. The unwary employer who fails to comply should be concerned about becoming the next FLSA statistic.

How can your business stay in compliance and not end up in LinkedIn’s shoes?

Performing a “self-audit” for FLSA compliance is a safe practice to maintain yearly. This FLSA audit should include, but by no means should be limited to, the following:
• audit payroll and time-keeping records and overtime practices for the past three years;
• sanction effective overtime policies indicating overtime must be pre-approved at your workplace;
• efficiently document the use and administration of the “comp time” and/or “pay deduction” practices for nonexempt staff;
• remember that exemptions are the exception to the rule. Your number of exempt employees should be much smaller than the number of non-exempt employees;
• attempt to identify any problem areas in time-keeping practices within the nonexempt classified staff;
• identify those employees who may be working over 40 hours in a seven-day period, and determine if the overtime rules apply to these employees;
• discover those employees who are working two or more separate jobs for your company and track the number of hours worked in a seven-day period;
• assess “comp time” policies and procedures, and confirm that they are being followed by all nonexempt staff;
• support your “good faith” defense by having legal counsel examine your exemption decisions and prepare an opinion letter;
• display FLSA wage/hour/overtime/age posters in conspicuous places where all employees can see them.

For more information about the FLSA and other federal wage laws, visit http://www.dol.gov/whd.