The federal Fair Labor Standards Act (FLSA) sets some basic rules when it comes to paying employees minimum wage and overtime, but certain common pay practices can violate the law without employers even knowing it. If any of the following sound familiar, it may be time for a compliance check.
1. “All Our Employees Are Exempt – They’re Salaried”
Don’t assume that just because you pay your employees a salary, they are considered exempt (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, you must ensure that an employee’s specific job duties and salary meet all the requirements of the law for the specific exemption claimed.
2. “We Don’t Need to Pay Overtime – Our Employees Volunteer to Work Late”
Non-exempt employees must be paid for all hours worked, including time spent doing work not requested by the employer but still allowed (otherwise known as working “off the clock”). Employees generally may not volunteer to perform work without the employer having to count the time as hours worked. It is the responsibility of management to exercise control and see that work is not performed if the employer does not want it to be performed.
3. “Overtime Doesn’t Apply – We Use Contract Workers”
While it is true that independent contractors are not entitled to overtime pay because they are not considered “employees” covered under the FLSA, the mere existence of a contract stating that a worker is an independent contractor is not sufficient to determine the worker’s status. Analyze the underlying nature of each relationship in light of all relevant factors to ensure that each worker is properly classified.
Note that state wage and hour laws may also apply to employment subject to the FLSA. When both the FLSA and a state law apply, the law setting the higher standards must be observed. If you have any questions regarding permissible pay practices, please consult a knowledgeable employment law attorney.