Compensation, Legal Issues

Wages, Salaries & Overtime – Oh My! 4 Myths About Employee Pay

Illustration by istockphoto.com

By David Hackett

We get up at 12 and start to work at 1! Take an hour for lunch and then, at 2, we’re done! Jolly good fun!”

In the 1939 classic The Wizard of Oz, when Dorothy finally reaches the city of Oz she’s met by a happy bunch of residents who sing these lyrics. But working schedules in Oz are a far cry from reality where, instead of fewer hours, many are often asked to work extra hours.

The question this often leaves for employers is, “how and when should workers be paid for overtime?”

4 myths about wage and hour laws

Although the federal law governing workers’ wages and hours of employment is among the oldest legislation on the books, it is perhaps the one least complied with by employers. According to National Economic Research Associates, employers spent $467 million settling wage and hour lawsuits at both the state and federal level in 2012. That’s nearly half a billion dollars on lawsuits related to wages and salaries and overtime.

Now that’s an “oh my!” statistic likely to send chills down the spine of HR professionals everywhere.

More often than not when wage and hour laws are violated, it’s not an intentional act by an employer, but rather a misunderstanding of the rules. It may be a surprise to some HR professionals to learn that a few commonly held beliefs and practices are actually illegal.

Below are four myths related to wage and hour laws and suggested steps HR professionals can take to make sure their companies stay within the law.

Myth #1: Employees paid a salary are not entitled to OT

It’s not just employers that have this misconception. Many employees wrongly believe that if they’re salaried, they don’t have the right to ask for overtime. But salary is only half of the equation when it comes to determining whether or not an employee is entitled to overtime pay.

Generally, under the Fair Labor Standards Act (FLSA), employees are considered “exempt” from overtime if they are paid a salary of at least $455 per week without deductions for time off and they perform certain duties falling within one of the exemptions as defined by the FLSA. Thus, HR professionals should closely review the roles and responsibilities of all of their employees as well as all new hires before assuming that offering a salary eliminates the need for overtime pay. A careful reading of the FLSA will make it clear which employees are “exempt” and which employees are “non-exempt.”

Myth #2: A worker’s day starts when their computer boots-up

Finding out that this is a myth might be a motivator to upgrade technology. A non-exempt employee’s day does not start when the computer boots-up, but when they hit the button to turn on the computer.

If the computer takes five minutes to boot-up because it is older and slower, the employer is required to pay employees for those five minutes. This falls under a section of the FLSA that provides guidelines for employees being paid for waiting time.

The U.S. Supreme Court has stated that the test to determine whether or not an employee needs to be compensated for stand-by time is whether the time is spent predominantly for the employer’s or employee’s benefit. In the case of turning on the computer, that’s clearly an activity that benefits the employer as the employee could not do their work if the computer did not turn on.

In order to avoid unnecessary overtime payments, HR professionals should have a detailed understanding of their employees’ daily activities and build necessary prep and wind-down time into their shifts and schedules.

Myth #3: Employees who take work home for convenience are not entitled to OT

False again. Any non-exempt employee who takes work home, even if the employer has not encouraged them to do so, is entitled to overtime pay.

This may have been less of a concern a decade ago, but in an age when employees are constantly “connected” via the Internet, mobile phones and tablets, employers need to be extremely mindful of when their employees are engaging in work related activities.

HR professionals can protect their companies by outlining overtime and clear remote work policies and establishing consequences for employees who bring work home when they are told not to do so. Employers must also diligently enforce these policies and ensure their non-exempt employees are not “suffering” work that is not recorded.

Myth #4: Employers can give comp time instead of overtime

For many employees, the idea of receiving time-off for extra hours worked instead of additional pay is an attractive option. In fact, it’s something that many employees request.

Unfortunately, under the FLSA, it’s not a legal practice for private sector employees. As I write this, there is a bill that has been proposed in Congress that would enable employees to choose between receiving overtime pay and comp time.

In the public sector, this choice already exists for state and federal workers. But as it stands today, it’s something that private sector employers must stay away from.

It should be noted that “comp time” should not be confused with “flex time.” If a non-exempt employee works 10 hours in one day and an employer wants to give them the ability to work six hours on a day later in the week, it is completely acceptable as long as the employee does not work more than 40 hours total in a given week. Once that threshold has been crossed, the employee must be paid overtime.

Employers that offer flex time must be very careful to track how their employees are using it to make sure that the 40 hour mark is not surpassed.

Conclusion

Given that employee compensation is such a fundamental part of business operations, one might assume that it is also very well understood. But the rising number of cases alleging wage and hour violations, the increased enforcement from the U.S. Department of Labor and the commonly held misconceptions outlined here indicate otherwise.

Instead of anticipating a worst-case scenario, HR professionals simply need to be cautious in the practices they use and vigilant in monitoring employee behavior. Federal and state wage and hour laws are complex, so there’s no “yellow brick road” to follow.

But there are plenty of pitfalls that can be avoided if one knows where to look.

David L. Hackett is an attorney with the law firm Buchanan Ingersoll & Rooney. He has represented employers before federal and state courts, arbitration hearings and administrative agencies. In addition, David has defended claims of unlawful discrimination, retaliation, sexual harassment, wage and hour violations, wrongful discharge, unfair labor practices, unemployment compensation, breach of contract and whistleblower complaints, as well as noncompete, nonsolicitation and trade secret litigation. Contact him at david.hackett@bipc.com.C
  • Felicia

    I would hope that if a computer took 5 mins to boot up, the employee could be doing something work-related and not just staring at a screen. But really, if you’re worried about 5 mins, what do you do when they (gasp!) need to use the restroom or get a cup of coffee?!

    • snoglydox

      Why are you drinking coffee and using the restroom on my time, Felicia?

  • http://www.cloudstaff.com/ Luetta Fox

    A very informative article about payroll practice. Thanks for sharing this very helpful post.

  • http://www.process-box.com/ Clarissa Lucas

    Salary is one of the important factors that employees consider in accepting any job. It is only right to clear things up when it comes to this sensitive matter.