Regardless of who you supported in the recent Presidential election, one thing both candidates agreed on was that the Fair Labor Standards Act, or FLSA, is not going away. The FLSA is a Depression-era law that has seen relatively little change in nearly 90 years. It created a federal minimum wage and required that most employees be paid overtime of 1.5 times their regular hourly rate when an employee works more than 40 hours in a workweek. So why, after so many years, do employers regularly trip up on this law, sometimes costing them in the hundreds of thousands of dollars?
Common FLSA Misconceptions
Some employers have come up with some “creative” ways to avoid paying overtime, but the law is very unforgiving. Unless you fall into some very narrow exemptions, such as management, outside sales, or an office administrative job with substantial independent discretion, you likely owe the employee overtime if it’s earned.
Below are five misconceptions employers often make include:
- Thinking that paying an employee a “salary” means you don’t have to pay overtime. It’s true that you cannot be exempted from overtime unless you pay someone a salary (which must be at least $35,467), but you have to also look at job duties.
- Agreeing with an employee not to pay overtime if the employee is entitled to overtime. You can agree, but if the employee later says he worked overtime and you didn’t pay him, that’s not a defense. You will have to pay the overtime. And double damages. And attorney’s fees.
- Calculating overtime using more than one workweek. Employers who pay their employees bi-weekly may think they just need to make sure the employee doesn’t work more than 80 hours total. Employers need to look at each week individually. If the employee works more than 40 hours in a single week, you must pay overtime.
- Calling someone a “manager” just to make the person exempt from overtime. The person has to supervise at least two people, and have real decision making authority, such as hiring, firing, and evaluating the employees.
- Calling your “1099 employee” an independent contractor. Employers should resist the temptation to label individuals who regularly work for them in jobs that are closely related to the business (like a roofer for a roofing company; landscaper in a landscaping company) as 1099 independent contractors. They are almost always employees. Along those same lines, if your worker agrees that he will be a 1099 independent contractor, don’t bite. He can later come back and seek overtime if you haven’t paid it, even if you “agreed” he was 1099. The law doesn’t allow you to agree to break the law.
The FLSA is really a minefield of confusing pay requirements and job classification ambiguity. Even the best-intentioned employers often make mistakes.