The U.S. Department of Labor’s proposal of new overtime regulations should remind all employers about their need to adhere to the federal-level Fair Labor Standards Act.
FLSA covers minimum wage and overtime pay for employees engaged in interstate commerce or employed by a firm engaged in production of goods for commerce.
Avoiding slipping up on the FLSA’s rules and regulations is notoriously difficult, both for small businesses and large companies with sophisticated human resources and legal teams, observes attorney Martin Luff of the law firm of Vinson & Elkins.
If your business hasn’t looked recently at its wage and hour practices, he recommends that you use his firm’s quick checklist for performing a high-level, 30-minute desk audit to identify the most common blind spots. Items to check are:
Non-employed workforce. Does your business engage significant numbers of individuals as consultants or contractors? Has a legal analysis been done to confirm that they have been appropriately classified as non-employees?
Exempt classifications. When is the last time your organization looked at the different positions it treats as exempt and verified which exemptions apply and the factual basis on which those exemptions rely? Do you have up-to-date job descriptions for the exempt positions?
If this hasn’t been done recently, look again at the various exempt positions, focusing particularly on the ones that might be close calls – for example, administrative exemptions that rely on the individual having “discretion and independent judgment” on “matters of significance,” he says.
In addition, make sure that your payroll department is making only permissible deductions (such as deductions for personal absences of a day or more) from exempt employees’ pay.
Time recording. When was the last time you looked at how non-exempt employees record their time? Are rules for clocking in and out followed?
Has anyone looked recently at the organization’s policy on when employees should clock in and out for meal and rest breaks and confirmed that those comply with FLSA requirements?
Also, take a look at how many overtime hours are being worked by your employees – if it’s a significant number, then the potential liability for non-compliance is higher.
Regular rate calculations. In addition to their hourly wages, are your non-exempt employees paid anything else, such as bonuses, commission or allowances? If so, in most cases those amounts should be included in the regular rate of pay for overtime calculations.
State laws. Even if you feel comfortable that your business complies with the FLSA, have you stopped to think about any potential differences in state laws you need to adhere to?
In many cases, compliance with the federal law gets you all the way, Luff points out, but some states like California have distinctly different rules that need to be followed or you will be at risk for enforcement.
“If you read through the points above and feel like you are in good shape, then that’s great news. But stay vigilant and keep checking these points regularly,” he warns.
The law keeps shifting, job duties evolve and how things work in practice doesn’t always match your policies, he notes. “Training and regular review will help guard against your business tripping up.”
But if you read through these points and think your business might have blind spots, it’s time to follow up, he stresses. “Work with your in-house or outside counsel to make sure that any further investigations and discussions are privileged.”
