Common Overtime Mistakes
The idea of overtime is pretty straightforward. But getting it right in actuality is a lot more complicated. The federal laws – the Fair Labor Standards Act or FLSA – obligates employers to pay their workers fairly for every hour worked over 40 in a workweek. Employers can face severe consequences if they fail to provide overtime compensation. The experienced Chicago Area Business Lawyers of Bellas & Wachowski regularly see employers making overtime mistakes, leaving employees deprived of their overtime pay. We have identified 11 common mistakes employers make which that cost them considerably.Mistake #1: Assuming a Fancy Title May Always Be Exempted
That is incorrect. Executives, Managers and Administrators are exempt from the FLSA. The employee’s designation of a person’s job title does not matter in determining whether or not they are exempt. To qualify for the executive or administrative exemption, they must retain the authority to hire or fire workers, direct work to two or more full-time employees, exercise independent judgment, perform general business operations, or manage the business as their primary responsibility.Mistake #2: They Are Exempt Because They Receive a Regular Salary
You are paying your employees on a salary basis to eliminate overtime requirements. However, that is not enough by itself. To be considered exempt , the employees must earn above a standard threshold and be in administrative, executive, or professional capacities. Otherwise, overtime pay must be paid even if the employee is salaried.Mistake #3: Improperly Classifying Employees
Some employers shrewdly hold back the employee’s overtime, classifying them as exempt, thinking the employee may never find out. It is yet another serious error employers make. Misclassified employees can file a lawsuit to recover their benefits that can be a loss of thousands of dollars in unpaid overtime.Mistake #4: Encouraging Employees to Work off The Clock
In so many cases, employers make it a habit to call employees before their shift begins or tell them to clock out. It’s a severe problem for the employees. But it allows managers to pay less overtime compensation than what the employee is entitled to. Making employees work off the clock without the deserved payment may be illegal and violate the labor statute. The management must, however, exercise control and ensure the work is not performed off the clock.Mistake #5: Refusing to Pay Unauthorized Overtime
State and federal laws require employers to pay overtime to the deserved employees. The workers must obtain approval before starting any work over 40-hours per week standard. However, if the employer is informed about the employee working overtime, they cannot benefit from their work without compensating it.Mistake #6: Not Providing the Last Paycheck
The employers are under the obligation to pay for the hours worked by the employee. Whether the employee gets fired, laid off, or quits the organization, they must receive their paycheck within 72 hours or until the next payday. Assuming you can hold back the employee’s remuneration can invite serious lawsuits to seek lost wages under the FLSA.Mistake #7: Calculating Straight Time Pay For Overtime
We routinely receive queries from employees who are paid their regular, straight-time pay rate in place of the overtime they have worked. It is unfortunate, and FLSA necessitates the employers to compensate time and one-half for overtime.Mistake #8: Auto Deduction for Meals
Should employers use the auto-deduct meal break policy against employees to subtract their overtime? It can, in many cases, violate state or federal laws, mainly if the employee has worked early or through the lunch breaks. Employers cannot escape the obligation to maintain the correct time at the expense of the employee.Mistake #9: No Compensatory Time Off
Under FLSA, private sector employers are legally permissible to offer comp time (compensatory time) to the employees. Employees usually get extra hours off in place of overtime pay. The practice, also called banking hours, makes employees lose thousands of dollars of payment every year. In times when employees quit or are fired, they do not receive the banked time upon leaving.Mistake #10: Classifying Employees as Independent Contractors
This is the BIGGEST MISTAKE!
Employers tend to save significantly by classifying some of their workforces as independent contractors instead of employees. Under the Fair Labor Standards Act (FLSA), overtime provisions apply only to employees. Thus, courts work to analyze the “economic realities” of the relationship based on factors such as the employer’s degree of control, the skill required for the job, and the workers’ profit and loss opportunities. When these factors resolve, the misclassified individual may be entitled to all the unpaid overtime.Mistake #11: Not Keeping a Detailed Time Sheet
Employers must ideally maintain precise payroll records and all the essential information of the employees. Often, employers do not do that, which creates havoc while calculating proper overtime amounts. The FLSA requires employers to maintain at least 2 years’ wage computation, including the employee’s work time and schedules, time cards, wage rate tables, and additions or deductions.Do Not Hesitate to Get Help. Our Experienced Employment Lawyers Can Assist Your Business in Navigating These Laws
Mishandling pay and employees is one of the major mistakes most business owners tend to make. But this is avoidable. If the issues mentioned above are resolved, it will only strengthen the employer-to-employee relationship.
For more information on how you can simplify these rules and regulations, contact the experienced Chicago area business lawyers at Bellas & Wachowski. Use the contact sheet on the right to start your inquiry with us.