In 1938 the Federal Labor Standards Act went into effect. Since that time, many things about being an American employee have changed, but the FLSA rules and regulations have continued to protect employees. The Department of Labor enforces the FLSA which must be followed by all businesses. Companies that are not vigilant about maintaining the records of their employee’s hours worked, are opening themselves up to potential DOL investigations and employee lawsuits.
When it comes to labor standards, in some cases both state and federal laws may be applicable. In that situation, whichever law is the most beneficial to the employee will take precedence.
The federal standard (for non-exempt employees) is that employees must earn at least minimum wage. If they work over 40 hours they must be paid overtime at 1.5x their hourly rate.
Hours worked is loosely defined as any hours worked that are permitted or required by employer, regardless of location. There are many nuances and exceptions when it comes to this topic. Let’s look at some examples of what is and is not considered ‘hours worked’:
Waiting and On- Call Time:
Typically both waiting time and on-call time are not included in the hours that an employee works. However there are some caveats. According to the DOL, some examples of paid waiting time would be “a secretary who reads a book while waiting for dictation or a fireman who plays checkers while waiting for an alarm.” If an employee is allowed to remain on-call from home instead of from the place of employment, that is typically not counted as hours worked. The DOL does state that “additional constraints on the employee’s freedom could require this time to be compensated.”
Rest and Meal Periods:
Paid rest periods of 20 minutes or less are industry standard and “promote the efficiency of the employee’. These are usually counted as hours worked. If the break is extended but not authorized, or if there is an abuse of frequent rest times, this can result in disciplinary action. Meal periods of 30 minutes or more are typically not compensated as work time. If the employee is expected to perform any duties, active or inactive, while eating, then this would still be considered part of hours worked.
Home to work: The typical commute to and from work is not paid
One day assignment: A one day assignment at a site, other than the typical job site, does count travel time as hours worked. Employers may deduct the amount of time usually spent traveling to the main work site.
Overnight Travel: Regular hours worked are compensated, but non-working hours are not, unless additional work is being performed. The traveling hours are compensated as long as they occur during regular working hours.
Employers that fail to comply with these standards open themselves up to a formal Department of Labor investigation. This is a lengthy and painful process for both sides involved, and should be avoided at all costs.
The Department of Labor has conducted investigations for last year that have led to back wages being awarded totaling more than 230 million dollars. In 2021 there were more than 24,700 compliance actions. These company missteps caused severe harm to the livelihoods of their employees and the actions taken by the DOL (for easily preventable hours worked mistakes) also cost the companies massive amounts in penalties, time, and legal fees.
Here are 5 common mistakes to avoid to help your business stay FLSA compliant:
When determining if an employee is eligible for overtime, it is important to include non-productive time that meets the requirements of hours worked, such as rest breaks, training and travel time.
2. Allowing employees to waive overtime
Even if an employee voluntarily waives their right to overtime, an employer is still required to pay it. An example of this would be a childcare employee on payroll for a private family who signs a contract for a 50 hour a week nannying job, at a flat hourly rate. She tells the parents that she is happy to forgo overtime if they can agree on a specific rate. That employee could choose to file for back pay in the future because it is mandated under the FLSA that anything over 40 hours must be paid at time and half.
3. Averaging hours
Overtime is not determined based on the average of multiple weeks. It is on a week by week basis. If an employee works 30 hours this week and 50 hours next week, it does not mean they are not entitled to overtime because they technically averaged 40 a week. They must be paid time and a half for the extra ten hours worked during the second week.
4. Thinking they need authorization to get overtime pay
If an employee works overtime without getting prior authorization, they MUST still be paid for that overtime. The employee may be subject to disciplinary action for unauthorized overtime work, but withholding overtime pay would be a FLSA massive violation.
5. Incorrectly calculating overtime rate
The rate is based on one and a half times an employee’s regular rate (not to be confused with hourly rate). Any non-discretionary bonuses or shift deferentials must be calculated into the hourly rate in order to correctly determine the overtime rate.
Carefully monitoring all work related activities for your employees and clearly communicating to avoid leaving your business in a vulnerable position, are some of the smartest things you can do for the success of your business.
When deciding how to monitor your employee’s hours, it is crucial to choose comprehensive software. Hiring a payroll company that works with an advanced time clock program can be a huge benefit. Not only will they be able to monitor your employees hours worked and overtime, but employees will be able to clock in and out with ease, and everything will be seamlessly integrated into payroll without you having to lift a finger. There are even options for safeguards against misuse, including clocking in with biometrics such as fingerprints, Face ID or even voice recognition.
Whatever method you decided to use, making sure you are in compliance with the FLSA will go a long way in ensuring you have content employees and never have to deal with the Department of Labor showing up at your door.
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