The Fair Labor Standards Act (FLSA) became law as part of the New Deal. It establishes a minimum wage and requires employees to be paid overtime at one and a half times the regular rate for hours worked in excess of 40 in a week. The FLSA and state laws regulate overtime pay, minimum wage record-keeping and more for almost every employer, regardless of size or sector.
These laws are often confusing for employers. According to the Department of Labor, there’s been a 20 percent increase in organizations that have been found in violation of the FLSA between fiscal year 2009 and 2014. In fiscal year 2014 alone, it found more than $240 million in back wages for more than a quarter of a million workers.
Getting these details wrong can create bad feelings between your organization and current or past employees. It can also give your company a bad reputation as an employer and put it at risk for a lawsuit. Under the FLSA, employees owed back wages can be awarded “liquidated damages” of double what they should have been paid in the first place.
Here’s what you need to know to make sure your organization avoids common wage and hour mistakes.
Classify Workers Properly
Classifying employees as exempt or nonexempt from overtime rules often causes confusion for employers. Carefully evaluate the actual job duties of employees to determine whether they qualify as exempt or non-exempt. Keep in mind that being paid hourly is not the determining factor. Instead, it generally depends on whether the employee is paid a minimum salary ($455 a week) and the employee’s job duties.
Keep Good Records
Implement an effective system to record and maintain the records of all hours worked by nonexempt employees. Keeping track of hours can help you monitor when overtime may be a possibility.
Establish Clear OT Policies
These policies should specify how employees should report their time and for what time they will be paid — overtime, meals, travel, training and so on. In addition, they should establish a process for requesting, authorizing and requiring overtime.
Educate and Communicate
Make sure those in charge of overseeing wage and hour issues understand the law, as well as company policy on how to deal with issues such as unauthorized overtime, breaks, meal times and travel time. Educate employees on the written policies and procedures to help avoid mistakes that could lead to bigger issues down the road.
Know Your Tipped Wages Laws
If you employ tipped workers, proper treatment of their wages can be especially confusing, as the laws vary by state. Some simply follow the federal guideline: Tips of up to $5.12 an hour may be counted toward the current minimum wage obligation of $7.25. Overtime rules then apply to the federal minimum wage. The employer should calculate the overtime rate for the tipped worker by multiplying the minimum wage of $7.25 by 1.5 and then subtracting the hourly tip credit of $5.12.
Other states require paying above the federal minimum tipped wage, and still others do not allow tips to count against the federal minimum wage obligation. Know your state’s laws when it comes to tipped wages.
Need more help with the FLSA regulations? Contact us! We can help.
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