Wage and hour rules madness
arlier this week, I
exchanged over 20 e-mails with a client trying to explain how
to compute overtime pay.
As most of you know, new wage and hour
regulations went into effect in August. (On September 9, the
House of Representatives was still trying to repeal some of the
new
regulations.) The change prompted this
client to review its exempt administrative employees.
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For most employers, the new regulations
will have virtually no effect. The regulations raise the salary
requirements for most exempt employees, but for the most part,
they merely provide clarification on how to apply the
exemptions.
Nevertheless, the passage of these new
regulations is a good excuse to review your current wage and
hour practices. It is not an exaggeration to state that
everyone reading this article manages or works for a business
that is violating the wage and hour laws.
Unfortunately, plaintiff’s lawyers
are learning this as well. The number of back pay lawsuits
under the Fair Labor Standards Act is on the rise, and
plaintiff’s lawyers are learning that it is easier to
prove a wage and hour violation than to prove discrimination or
wrongful termination. It’s a lucrative practice.
The wage and hour laws, and the
accompanying regulations, both old and new, make it almost
impossible to determine how employees should be paid.
For example, overtime must be paid on the
employee’s “regular rate,” not hourly rate.
The regular rate includes incentive pay
and other amounts, so a company that pays overtime based on the
established hourly rate may not be paying enough. Most
employers are unaware of the difference.
To say that the wage and hour laws are pro
employee is an understatement. If an employee comes to an
employer and insists on a pay plan that violates the wage and
hour laws, the employer is still responsible for compliance.
Even if the employee is honorable, and
does not break his illegal contract to accept less money under
the wage and hour laws, the Department of Labor can bring an
action to collect the money for him.
On the other hand, if the employee does
decide to sue, he can sue for his back pay, an equal amount in
liquidated damages, and attorneys fees.
So, what starts out as potentially a
couple of thousand dollars in back pay becomes tens of
thousands of dollars in liability. And once you are sued, you
cannot settle for less than the employee is entitled to
receive.
In other words, a settlement for less can
be set aside, and an employer can be sued a second time for
failure to pay minimum wage or overtime.
It makes sense for an company to spend a
few hundred dollars to have its wage and hour practices audited
by an experienced, management labor lawyer.
This audit should include a review of
employees designated as exempt from overtime, salary practices,
wage and hour record keeping, and computation of overtime.
A competent attorney can also show you how
to correct improper practices without opening up a floodgate of
litigation and wage and hour claims.
If you think your company does not need an
audit, solve the following problem: An employee works his
regular 40-hour scheduled workweek, but comes in eight minutes
early every day to set up his workstation and leaves seven
minutes late each day to clean up. Does the employee have a
right to overtime compensation? If so, how much?
Good luck.
Frank Kollman is a partner in the law firm
of Kollman & Saucier, PA, in Baltimore, MD. He can be
reached by phone at (410) 727-4300 or fax (410) 727-4391. His
firm’s web site at www.kollmanlaw.com has articles, sample policies, news and
other information on employee/employer relations.
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