Overtime - Do It Right
BY EDWARD T. RUSSELL
Everyone knows that most hourly workers must be paid time and a half for work over 40 hours per week, but most employers would be surprised to learn that they can accumulate liability of upwards of $100,000 by working a secretary or receptionist as little as one extra hour per day without overtime over just a few years.
While some employers flout the law and mis-classify workers to save money, many others expose themselves to substantial liability unknowingly. In either case, full appreciation of the rules and the risks involved in breaking them would cause those employers to change their practices.
Here we look chiefly at the federal Fair Labor Standards Act (Wage/Hour Law), although state laws also address overtime:
Why are employees called "exempt or non-exempt"? The overtime law covers all employees except those who fall under an exemption. To be "exempt", an employee must be one of the following:
- Executive. An executive is someone who spends 80% of time engaged in the management of the business or regularly supervises the work of at least two or more workers. Other indicia: exercise of discretionary powers and authority to hire and fire or recommend such.
- Administrative. Must spend 80% of time in work directly involved in management policy or general operations. Exercises discretion and independent judgment. Regularly assists executive. Does specialized work requiring special training. Secretaries do not qualify without expanded duties.
- Professional. College degree or equivalent required. Involved with a) tasks which assume knowledge in an advanced field of learning, teaching, or science b) consistent use of discretion or judgment, c) intellectual work, d) artistic endeavors such as invention or use of imagination.
- Outside Salesperson. Makes sales calls away from business premises 80% of the time.
Do's and Don'ts. Do apply the following rules to your business if it employs workers:
- Think that the authorities won't hold your company to a strict standard. Enforcement depends on culpability.
- Allow hourly workers routinely to arrive early or stay late at the office. If they must work longer hours to do their jobs, pay them overtime. If they keep these hours for their own convenience, document to them that these are not hours of work. Audit time sheets.
- Allow hourly employees to take work home willy nilly. Be aware of what supervisors are allowing or asking of your employees.
- Average hours over more than one week.
- Let a "flex time" system allow hourly employees to work more than 40 hours over a seven day period.
- Give compensatory time to hourly workers.
- Be careful in docking pay of salaried workers. Done improperly, it could disqualify the exempt status of whole classes of employees that might then be due overtime.
- Keep records of hours worked (of hourly workers) for a period of three years.
- Consider having employees certify each year as to the hours they have worked -- this will allow you to refute claims later.
What are the risks?
Workers may be quick to contact the authorities or bring their own claims if they are fired or feel they've been treated badly. They can collect treble damages plus costs in Massachusetts, and the Department of Labor ("DOL") may seek civil penalties of $1000 per violation.
To add enforcement strength, Massachusetts moved prosecutions of its wage and hour laws to the Attorney General's Office last year. An individual complaint may lead to a company-wide investigation, and substantial violations are publicized.
Comment: Without serious attention to wage/hour law violations your company may subject itself, knowingly or not, to significant risk of prosecution .
© ASSOCIATION OF INDEPENDENT GENERAL COUNSEL 1994; (all rights reserved). This article is not intended as legal advice. Consult a qualified attorney for assistance concerning a specific issue or problem.