Wage and Hour Worries
by Rick Galbreath, SPHR
rick@performtogrow.com
What do IBM, AT&T, Wal-Mart and the NYPD have in common?
A good answer would be that they are all well respected, multi-million dollar organizations packed with really bright, well trained managers and lawyers.
A less obvious but more pertinent answer is that each of these companies has dealt with extremely expensive lawsuits over unpaid overtime in the last couple of years. Literally thousands of companies, big and small, have been involved in similar cases. Overtime cases are one of the fastest growing types of litigation in America today.
Sound scary? Sometimes it is smart to be scared. This is one of those times. Prove you are truly smart by taking proactive steps now to ensure you won't be caught up in costly litigation, resulting poor employee morale and other negative impacts related to violation of one of the many Fair Labor Standards Act, state, municipal and other legal requirements.
Employers must be diligent in ensuring that their overtime policies are compliant with all relevant federal and other employment laws. Unfortunately, using common sense to determine whether a particular position is exempt or not exempt, to determine the appropriate pay rate for overtime, or when overtime should be paid is often the surest way to get in trouble. Wage and hour laws and regulations are extremely complex.
Just having legally compliant policies is not enough. Employers must also make sure that their policies are actually being followed. For example, assume a company requires advanced supervisory approval before overtime can be worked. Assume further that a well-intentioned employee works during their “unpaid” lunch period to meet an important deadline without supervisory approval or even requesting to be paid for the time. The supervisor is under tight budget constraints and conveniently looks the other way. In cases like this, when an employer ”suffers or permits” an employee to perform work, overtime is often due. Many employees have learned this and related wage and hour rules the hard, expensive way.
Employers must also ensure that accurate records are kept. Many employment laws place the burden of recordkeeping on the employer. Failure to do a good job in this area will often result in significantly higher cost to the employer. Clear policies, procedures, training and enforcement on pay and time-reporting practices is crucial. Good records and related procedures will help avoid problems and make those which do occur much easier to fix
It is best to get an outside professional’s help to audit your current policies and practices. An objective perspective will significantly aid in ensuring that proper job analysis is done, policy and practice deficiencies are recognized and fixed. It's far better to spend a little money up front than a lot of money later.
If you think you might have, for example, someone classified as exempt who might be non-exempt, what should you do to fix it?
1. Do a thorough analysis of the job to determine if it is actually exempt or non-exempt. Again, use of an outside, objective professional will help ensure the quality of the decision finally made and help you avoid unnecessary expense.
2. Assuming that you determine that the position should have been paid overtime but has not been, work with the employee(s) in question and come up with a reasonable estimate of the unpaid overtime they have worked. Working together with the employee(s), you will come up with something that is both fair and defensible. Make sure to get a written account from the employee(s) on the hours owed.
3. Compute your additional payroll liability - how much more do you owe the person? Bringing in someone thoroughly versed in the complexities of wage and hour issues will make sure you are fair and legally correct in the amount that you pay, without overpaying (which can be very easy to do!)
4. Formalize a “going forward” hourly pay. Outside advice is warranted to help ensure that your hourly rate, if changed, will serve your longer-term interests.
5. Pay the employee’s straight salary and overtime as appropriate going forward, making sure to keep detailed records as required by law.
So if your last name isn’t Walton and you don’t happen to have an extra $33.5 million dollars just lying around this month, double-check on any borderline exempt/non-exempt position classifications, and on your pay policies and practices.
Rick Galbreath, SPHR, is president and founder of Performance Growth Partners Inc., a full service organizational improvement firm specializing in HR audits, corporate outplacement services, customer service assessments, customer service training, supervisory training, employee surveys, employee handbooks, teambuilding programs and team training, on-call and project-based HR consulting services, outsourced HR services, employee retention programs, performance improvement programs, executive coaching, manufacturing process and operations improvement consulting, training and programs, safety assessments, safety training, strategic planning, employee retention program, performance improvement programs, interim executive placement, conference speaking, keynote addresses, business turnaround consulting and a wide range of other services. Contact Rick toll-free at (877) 739-4747 or e-mail him at rick@performtogrow.com.
© 2008 Performance Growth Partners Inc.
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