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31638 Views 17 Replies Latest reply: Aug 20, 2009 2:58 PM by SBOCTeam-KhWmv
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Aug 7, 2009 9:49 AM

Event 8/20: Overtime: Who Gets It?

Wage and hour laws are a continual source of frustration for employers. These laws, which include minimum wage and overtime, cover virtually every employer in the United States. Failing to understand under what circumstances you must pay your employee overtime could cost a lot, including back pay and civil penalties to say nothing of potential criminal fines.

To help you comply, Elizabeth Milito, Senior Executive Counsel with the National Federation of Independent Business (NFIB) Small Business Legal Center and an expert on employment issues, will guide you through the a two-part series covering the basics of the Fair Labor Standards Act, the federal wage and hour law.

Part I of the series, on August 20, will help you determine if your employees are exempt from overtime. The forum will also cover:

  • The difference between exempt and non-exempt status - Simply paying your workers a salary does not exempt them from overtime. Learn how to determine which employees should be paid overtime and which should not.
  • Positions that are automatically exempt from overtime - Depending on your type of business, many of your employees may not be entitled to overtime, such as commissioned salespersons. Find out the major exemptions.
  • Plus other tips and answers to your other overtime questions.

In Part II of the series Overtime: How Much?, on August 27, Milito will cover a host of overtime calculation issues that have become pitfalls for employers, including work time involving travel, training, and time spent responding to emails at home.

 


About Elizabeth Milito

Elizabeth Milito is Senior Executive Counsel for the Small Business Legal Center at the National Federation of Independent Business (NFIB), the leading small business association. A nonprofit, nonpartisan organization founded in 1943, NFIB represents the consensus views of about 350,000 members in Washington D.C., and all 50 state capitals. Milito is a frequent author, speaker and advisor on all aspects of the employment relationship and compliance with employment and labor laws, including wage-hour issues, independent contractor classifications, sufficiency of employee handbooks and proper hiring procedures. She previously served as an editorial reviewer for the ABA's Guide to Workplace Law.

Elizabeth will be live on SBOC on August 20 at 2:00 p.m. EST. However, if you can't participate at that specific day/time - you can post a question now and check back during or after the event for Elizabeth's response. Elizabeth will try to answer as many questions as possible on the 20th, but may not get to all of them. Note, you do not need to register for the event. You simply need to be a member of SBOC to post a question. If you don't have a user ID, join now, it's free.

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  • MajorNathan Newbie
    MajorNathan
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    Aug 20, 2009 2:07 PM (in response to SBOCTeam-KhWmv)
    Re: Event 8/20: Overtime: Who Gets It?

    When determining exempt/non-exempt employees, how do I account for my creative people?? To recruit the best people requires that they have flex-time, so some weeks they will work 60 hours and some weeks they will have less than 40.
    • NFIBLegal Newbie
      NFIBLegal
      Currently Being Moderated
      Aug 20, 2009 2:17 PM (in response to MajorNathan)
      Re: Event 8/20: Overtime: Who Gets It?

      First some basics on terminology - all employees who do not qualify for a specific exemption are considered "nonexempt" from the FLSA's overtime pay and minimum wage requirements. Employers bear the burden of proving employee should be classified as exempt.

       


      Flexible work schedules are certainly a desirable employee benefit. Designing a flexible work schedule for an exempt employee is usually a little easier since overtime pay is not an issue. The most common exemptions include the so-called white collar exemptions. The FLSA contains dozens of exemptions. However, the most well-known are the so-called "white collar" exemptions, which includes:

       

      Executive; Administrative; Professional; Highly Compensated; Outside Sales; and

       

      certain computer employees.

       


      If the requirements of an exemption are met, the employer is not required to pay overtime to the exempt employee under the FLSA.

       


      For nonexempt employees there is no limit to the number of hours that an employee may work in a workweek, so long as the employee is paid for all hours worked. So unless your state has a daily overtime law, you could offer something like 4-10 hour days as a flexible arrangement.
  • MajorNathan Newbie
    MajorNathan
    Currently Being Moderated
    Aug 20, 2009 2:27 PM (in response to SBOCTeam-KhWmv)
    Re: Event 8/20: Overtime: Who Gets It?

    With the coming "reforms" to helathcare and other issues, what is the incentive for me hire people?? Right now it seems the best course of action is to write service contracts and never have to deal with these issues, what is the down side to this strategy??
    • NFIBLegal Newbie
      NFIBLegal
      Currently Being Moderated
      Aug 20, 2009 2:36 PM (in response to MajorNathan)
      Re: Event 8/20: Overtime: Who Gets It?

      As I said before wage and hour compliance is difficult, but it's worth the effort.

       


      Mislabeling of 'contractors', in particular, can cause big headaches for employers. A common misclassification/overtime claim plays out as follows: an independent contractor (i.e., worker who receives a 1099) claims they are actually an employee; worker also claims she is nonexempt and owed overtime for all hours worked over 40. Employer has not kept record of hours worked because the employer doesn't require (or keep) timesheets from independent contractors.

       


      So while the FLSA does not apply to independent contractors, you want to make sure that individuals labeled as independent contractors are in fact 'independent.' For information on the U.S. Department of Labor's independent contractor test go to http://www.wagehour.dol.gov/
  • SBOCTeam-KhWmv Apprentice
    SBOCTeam-KhWmv
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    Aug 20, 2009 2:00 PM (in response to SBOCTeam-KhWmv)
    Re: Event 8/20: Overtime: Who Gets It?

    Community Members,

     


    Please join us in welcoming Elizabeth Milito to your Small Business Online Community. Elizabeth is here to guide you through the basics of the Fair Labor Standards Act, the federal wage and hour law. Today, Elizabeth will be using the screen name NFIBLegal.

     


    About Elizabeth

     


    Elizabeth Milito is Senior Executive Counsel for the Small Business Legal Center at the National Federation of Independent Business (NFIB), the leading small business association. A nonprofit, nonpartisan organization founded in 1943, NFIB represents the consensus views of about 350,000 members in Washington D.C., and all 50 state capitals. Milito is a frequent author, speaker and advisor on all aspects of the employment relationship and compliance with employment and labor laws, including wage-hour issues, independent contractor classifications, sufficiency of employee handbooks and proper hiring procedures.

     


    To all Community Members

    If you have questions for Elizabeth, post it here by simply hitting reply and then refresh your browsers often to

     

    view Elizabeth's responses. She will try to answer as many of your questions as possible.
    • SBOCTeam-KhWmv Apprentice
      SBOCTeam-KhWmv
      Currently Being Moderated
      Aug 20, 2009 2:03 PM (in response to SBOCTeam-KhWmv)
      Re: Event 8/20: Overtime: Who Gets It?
      Let's start of with a basic question to get things started. Eliabeth, can you provide some context in which the FLSA was written? Who was it intented to protect initially?
      • NFIBLegal Newbie
        NFIBLegal
        Currently Being Moderated
        Aug 20, 2009 2:06 PM (in response to SBOCTeam-KhWmv)
        Re: Event 8/20: Overtime: Who Gets It?

        The federal wage and hour law or Fair Labor Standards Act (FLSA) was passed in in 1938 after the Depression, when many employers took advantage of a tight labor market to subject workers to less than desirable working conditions.

         


        FLSA guarantees an employee's right to be paid fairly; defines a 40-hour workweek; establishes federal minimum wage; sets requirements for overtime; restricts child labor; and requires that male and female workers receive equal pay for equal work. As a practical matter, the FLSA covers nearly all employees in the U.S.

         


        Unfortunately, the FLSA has been largely unchanged and was designed to regulate hours of work in an economy where one in five workers was employed on a farm and the factory whistle signaled the end of the workday. The Great Depression workforce bears little resemblance to the workplace we have today. The FLSA's antiquity makes it an attractive weapon for aggrieved workers and plaintiffs' attorneys.

         


        Wage and hour compliance is difficult, but it's worth the effort. Savvy and successful companies practice preventative strategies to avoid wage and hour liability.

         


        Remember - employers must comply with other local, state or federal workplace laws that set higher standards. As many of you know, state laws often afford employees greater protections than provided by the federal FLSA.
  • SBOCTeam-KhWmv Apprentice
    SBOCTeam-KhWmv
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    Aug 20, 2009 2:19 PM (in response to SBOCTeam-KhWmv)
    Re: Event 8/20: Overtime: Who Gets It?
    Often professionals in many industries are given an annual base salary. Despite this, the expectation is that the employee works more than 40 hours a week. Shouldn't they be entitled to overtime? Why are some higher paid professions exempt?
    • NFIBLegal Newbie
      NFIBLegal
      Currently Being Moderated
      Aug 20, 2009 2:26 PM (in response to SBOCTeam-KhWmv)
      Re: Event 8/20: Overtime: Who Gets It?

       

      While our workplace has changed dramatically in the last 60 years, the FLSA has not. This means that in the face of modern issues like telecommuting and flexible work arrangements, employers are still responsible for understanding and complying with the same statute that was initially enacted to address a primarily industrial workplace.

       


      Again, under the FLSA an employee can be exempt from minimum wage and overtime requirements if the employee is a bona fide executive, administrative, professional, or outside sales employee. Some computer employees are also exempt. In addition, highly compensated employees performing office or non-manual work and paid total annual compensation of $100,000 or more may also be exempt from the FLSA if they perform at least one of the duties of an exempt executive, administrative or professional employee. While these exemptions were ‘updated' in 2004, there is still dissatisfaction from some industries and workers who feel they are entitled to overtime. The fact that FLSA collective actions outnumber all other federal discrimination class actions combined and that in California, New York and Florida wage and hour class claims are filed daily shows that there is still a lot of dispute over who is or is not exempt from overtime.

       


      There are ways, however, to reward exempt employees for successful projects - for instance it's common to provide exempt employees compensatory time-off and bonuses for completion of projects. Moreover, if an employee raises any question as to their exempt status (i.e., suggests they should be nonexempt), it's always a good idea to perform an audit to ensure the position meets the criteria for exemption.
    • NFIBLegal Newbie
      NFIBLegal
      Currently Being Moderated
      Aug 20, 2009 2:28 PM (in response to SBOCTeam-KhWmv)
      Re: Event 8/20: Overtime: Who Gets It?

       

      While our workplace has changed dramatically in the last 60 years, the FLSA has not. This means that in the face of modern issues like telecommuting and flexible work arrangements, employers are still responsible for understanding and complying with the same statute that was initially enacted to address a primarily industrial workplace.

       


      Again, under the FLSA an employee can be exempt from minimum wage and overtime requirements if the employee is a bona fide executive, administrative, professional, or outside sales employee. Some computer employees are also exempt. In addition, highly compensated employees performing office or non-manual work and paid total annual compensation of $100,000 or more may also be exempt from the FLSA if they perform at least one of the duties of an exempt executive, administrative or professional employee. While these exemptions were ‘updated' in 2004, there is still dissatisfaction from some industries and workers who feel they are entitled to overtime. The fact that FLSA collective actions outnumber all other federal discrimination class actions combined and that in California, New York and Florida wage and hour class claims are filed daily shows that there is still a lot of dispute over who is or is not exempt from overtime.

       


      There are ways, however, to reward exempt employees for successful projects - for instance it's common to provide exempt employees compensatory time-off and bonuses for completion of projects. Moreover, if an employee raises any question as to their exempt status (i.e., suggests they should be nonexempt), it's always a good idea to perform an audit to ensure the position meets the criteria for exemption.
  • SBOCTeam-KhWmv Apprentice
    SBOCTeam-KhWmv
    Currently Being Moderated
    Aug 20, 2009 2:37 PM (in response to SBOCTeam-KhWmv)
    Re: Event 8/20: Overtime: Who Gets It?
    Who regulates overtime pay and what are the penalties?
    • NFIBLegal Newbie
      NFIBLegal
      Currently Being Moderated
      Aug 20, 2009 2:42 PM (in response to SBOCTeam-KhWmv)
      Re: Event 8/20: Overtime: Who Gets It?
      Wage and hour laws are enforced by both the U.S. Department of Labor and state labor divisions or departments. In addition some local governments have wage and hour laws.

      Employers must comply with the law (federal, state or local) that sets the highest standard (i.e., is most beneficial to the employee). As many of you know, state laws often afford employees greater protections than provided by the federal FLSA. Example - California requires nonexempt employees be paid overtime for hours worked in excess of eight hours day and employers must pay a rate of not less than 2x regular rate for work in excess of 12 hours per day. Alaska also has a daily OT law.
  • SBOCTeam-KhWmv Apprentice
    SBOCTeam-KhWmv
    Currently Being Moderated
    Aug 20, 2009 2:44 PM (in response to SBOCTeam-KhWmv)
    Re: Event 8/20: Overtime: Who Gets It?
    If I set expectations that the annual base salary assumes 50 hours a week, do I still need to pay overtime?
    • NFIBLegal Newbie
      NFIBLegal
      Currently Being Moderated
      Aug 20, 2009 2:49 PM (in response to SBOCTeam-KhWmv)
      Re: Event 8/20: Overtime: Who Gets It?

      It depends on whether the employee is exempt or nonexempt.

       


      If the employee is nonexempt, overtime would be due because for nonexempt employees overtime pay is due for any week in which a nonexempt employee worked more than 40 hours. Remember overtime pay is based on a 7-day work week NOT on the pay period. For example, even if the employee worked less than 80 hours in a 2 week pay period, the employee would be due overtime if in one of those weeks, she worked more than 40 hours.

       


      An employee can be exempt from minimum wage and overtime requirements if the employee is a bona fide executive, administrative, professional, or outside sales employee. Some computer employees are also exempt.

       

      • In order for an exemption to apply, an employee's specific job duties and salary must meet all the requirements of the Department of Labor's regulations.
      • Job titles do NOT determine exempt status.
      • To qualify for exemption, employees generally must be paid at a rate not less than $455 per week on a salary basis. These salary requirements do not apply to outside sales employees, teachers, and employees practicing law or medicine.
      • Being paid on a "salary basis" means an employee regularly receives a predetermined amount of compensation each pay period on a weekly, or less frequent, basis. Subject to some exceptions, an exempt employee must receive the full salary for any week in which the employee performs any work, regardless of the number of days or hours worked.
      • SBOCTeam-KhWmv Apprentice
        SBOCTeam-KhWmv
        Currently Being Moderated
        Aug 20, 2009 2:51 PM (in response to NFIBLegal)
        Re: Event 8/20: Overtime: Who Gets It?
        What are the typical pitfalls that most small businesses fall into regarding overtime pay?
        • NFIBLegal Newbie
          NFIBLegal
          Currently Being Moderated
          Aug 20, 2009 2:56 PM (in response to SBOCTeam-KhWmv)
          Re: Event 8/20: Overtime: Who Gets It?

          Misclassification (i.e., calling a nonexempt employee an exempt employee) is the most common FLSA mistake. Variations of this problem include the following:

          • If I put an employee on salary, he is exempt
          • If an employee is a manager, supervisor or administrator, he is exempt
          • If an employee earns over $100,000, he is exempt
          • If an employee has a college degree and works in the office, he is exempt
          • If an employee requests to be paid a salary, rather than hourly, he is exempt
          • If an employee will never be required to work overtime, he is exempt

           

          The second biggest FLSA problem relates to payment of overtime or miscalculation of overtime. For instance, not paying a nonexempt employee for time spent doing work at home (checking a blackberry), interrupted meal breaks, or for travel time. This topic - calculation of overtime - will be discussed during next week's forum.
          • SBOCTeam-KhWmv Apprentice
            SBOCTeam-KhWmv
            Currently Being Moderated
            Aug 20, 2009 2:58 PM (in response to NFIBLegal)
            Re: Event 8/20: Overtime: Who Gets It?

            Elizabeth,

             


            On behalf of the SBOC Team and the members of the Small Business Online Community, we wanted to say we truly

             

            appreciated your time today and your professional responses to user questions. Community members, while our

             

            session with Elizabeth has now concluded, please feel free to discuss today's session and the questions answered.

             

            Again, if you'd like more information about Elizabeth and NFIB, visit www.nfib.org. For a PowerPoint containing some of the details of this topic, you can visit: http://www.nfib.com/tabid/825/Default.aspx?cmsid=49140&v=1.

             


            Please don't foget to join us next week as Elizabeth joins us again to work through how to calculate OT properly. As Always, you can post your questions in advance of the session.

             


            Thanks again,
            The SBOC Team

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