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Avoid FLSA Violations: Understanding the Fair Labor Standards Act

May 14, 2015

There are many things that employers regularly concern themselves with, including earning a profit, managing employees, keeping track of inventory, billing customers, paying vendors, controlling overhead costs, processing payroll, and the list goes on. While these items are important, nothing will get your attention like a telephone call, letter, or visit from the Department of Labor. The U.S. Department of Labor, Wage and Hour Division, enforces the regulation known as the Fair Labor Standards Act, which was made law in 1938. Since 2000, FLSA lawsuits by employees against their employers have risen a staggering 120%. Here are the three top areas that get employers in trouble.

1). Misclassifying employees as exempt from overtime.
To avoid this violation, ensure that all of your "exempt" employees are working in positions that have a well-defined set of duties, salary level, and salary payment structure. Exempt employees are broadly defined as having professional, administrative, executive, computer, and outside sales positions. Recent Department of Labor initiatives indicate a trend toward requiring employers to explain why they designate a position as exempt and providing that explanation to the employee holding the position.

2). Not accurately recording and/or paying employee hours.
Depending on the nature of the work and type of business, this can be a challenge. As a general rule, if work is being done by a non-exempt employee that is for the benefit of the employer, those hours should be counted and compensated. This may include preparing for work by putting on required gear or uniforms, driving between job sites, and shutting down or cleaning machinery after the workday is done. An employee who works in excess of 40 hours, over 7 consecutive days, is to be compensated at time and a half for those overtime hours.

3). Waiving overtime or paying overtime incorrectly.
Attempting to pay overtime as a lump sum without calculating the hours, paying a salary with the expectation of work in excess of 40 hours per week, having an agreement between the employer and employee to waive overtime rules, or announcing that no overtime will be paid unless authorized in advance does not relieve the employer of FLSA compliance.

It takes time and resources to stay on top of all the guidelines and regulations involved with managing employee time and attendance. Virtual TimeClock software will help you stay FLSA compliant by impartially recording every punch time and accurately calculating total hours based on the overtime rules for your state.

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