Managing HR Risk Part 2: Do I Have to Pay My Employees Overtime Pay?

This is a question that we get frequently, and it is one of the high-risk areas that virtually all employers need to deal with. The Fair Labor Standards Act (FSLA) is a federal law that covers this area.

Employees can be covered by the FLSA in two different ways. Employees are entitled to enterprise coverage if they work for businesses or organizations that have at least $500,000 per year in sales, hospitals, nursing homes, schools, or preschools. If there is no enterprise coverage, then employees may have individual coverage under the FLSA if their job duties involve them in commerce or the production of goods for commerce, like factory workers or people who travel to other states for their jobs. Domestic service workers, such as maids or full-time babysitters, also qualify for coverage under the FLSA.

Generally, if you allow your employees to work overtime, defined as any hours worked more than 40 hours in a one week period, you are required to pay your employees one and one-half times your normal pay rate, for those overtime hours worked. However, the FLSA contains several exceptions to the overtime pay requirement for certain kinds of businesses and certain kinds of employees. Because overtime pay can cost your business a significant amount of money, you need to be aware of which employees are "exempt” from the overtime provisions in FlSA and which are “non-exempt.”

For instance, the overtime pay requirement does not apply to regular hours worked on weekends, nights, and holidays, so long as there is not more than 40 hours worked in one week period. In other words, you are not required to pay overtime to an employee solely because he or she works on Sundays. Likewise, if your employees are executive, administrative, professional, computer, or outside sales employees, as defined by the Department of Labor regulations, and draw a salary of at least $455 per week, or $23,660 per year, then they are exempt from the overtime pay requirement.

Department of Labor regulations provide very specific guidance about which positions qualify as exempt, usually based on the types of duties that those positions involve, not the job title given by the company. For instance, in order for an executive position to qualify as exempt, the worker’s duties typically must involve management responsibilities, supervision of at least two other workers, and authority to hire and/or fire other employees. Likewise, in order for an administrative position to be exempt it must be at a level to direct a significant portion of the business, exercise broad discretion and independent judgement. A position like administrative assistant would likely not meet these criteria. Furthermore, these types of exempt positions usually must be paid on salary, rather than on an hourly basis.

You also have to be mindful of your employees’ duties when classifying them as exempt or non-exempt. Some positions require a worker to perform both exempt and non-exempt duties. Therefore, depending on whether the worker’s duties for that particular week qualify as exempt or non-exempt, you may or may not be required to pay that worker overtime, should he or she work more than 40 hours in a one week period. If the employee performs any non-exempt work during the one week pay period he or she must be paid as a non-exempt employee.

The law requires that covered employees be paid overtime pay for hours actually worked in excess of 40 hours per week. Paid vacation, sick, PTO, bereavement or other types of paid time off do not count toward the 40 hours worked. For example, an employee works 10 hours per day Monday through Thursday, and takes a PTO day on Friday. You would pay him 48 hours of straight time pay.

One area that some companies get into trouble with is withholding pay because they did not authorize the employee to work those hours. The law is very clear on this. If they worked the hours, they must be paid for them, even if they didn’t have approval to work them.

Finally, some states have also enacted laws that mandate overtime pay in certain circumstances, or that provide for overtime pay that is more than the FLSA standard of one and one-half times the regular wage. If both the FLSA and a state overtime law apply to your business, you must pay whichever overtime rate is higher to your non-exempt employees who work overtime.

If you have any questions please give us a call at 515-962-7035 and we will be glad to assist you.

Please visit our website, http://www.yourownhrpro.com/

Managing HR Risk Part 1: Harassment

When I talk to business leaders, the topic of employee related legal risks is one that most seem to want to avoid. Despite almost daily news headlines about harassment claims, back-wage settlements, undocumented workers, and wrongful discharge lawsuits, an alarming number of small business leaders don’t know if their company is at undue risk or not, or what they should be doing to minimize risks. So over the next few weeks Bev and I will cover some of the primary risk areas that employers face, and ways to minimize those risks.

The first area I would like to address is harassment. I choose this first, not only because the legal costs and settlements can be astronomical, but because having a harassment-free work environment is really in the best interest of every organization anyway. People are at their best and most productive when they can work in a respectful environment where they feel valued.

One would think that forty five years after the enactment of the Civil Rights Act, people would have gotten the message that discrimination and harassment is not OK in the workplace, but in 2008 more than 95,000 complaints were filed with the EEOC, up fifteen percent over the previous year. And most of these were against companies with fewer than one hundred employees.

And what is the cost of all of this? Well, most companies are lucky, …for only a few thousand dollars in attorney fees and maybe a hundred or so of their own man-hours they are able to successfully answer the complaints, and the complaints are dropped. Many though aren’t quite so lucky and end up in court. Often, even if the company has good documentation and has a solid defense, it will cost more to litigate the case than to settle out of court, so you never hear about those cases. You also don’t hear about the cases where they do spend thousands to litigate and win. The only cases that make the news are the ones that result in six figure and sometimes multi million dollar judgments.

Without going into a technical dissertation involving an alphabet soup of federal and state laws, the following classes are protected against discrimination and harassment in the workplace: race, age, creed, national origin, color, gender identity, sex, sexual orientation, disability, pregnancy, and religion. This means that you as an employer cannot make any hiring, firing, or other employment decisions based on these factors, as long as the person is able to do the essential functions of the job. It also means that you are required to provide a work environment where employees are not harassed on the basis of these classes.

Harassment takes two basic forms, quid pro quo and hostile working environment. Quid pro quo is linked almost exclusively to sexual harassment and essentially means this for that. It occurs when someone in a position of power or authority makes some condition of employment contingent on something he/she wants, i.e. sexual favors. It is highly unlikely that it will be as blatant as, “I’ll give you a big bonus if you have sex with me.” But it might sound something like, “I’m sure you’ve heard there may be some layoffs. Why don’t you and I go to dinner tonight, and I’m sure we can work out something to make sure your job is secure.”

The second form, hostile working environment, is actually more prevalent, and harder to control, because it can come from all levels of the organization as well as from vendors and customers. These are the jokes, comments, innuendos, slurs, pictures, emails, and so on, made against members of these protected groups… anything that creates a hostile working environment.

So, what do you need to do to safeguard your company against harassment complaints? The essential steps are not difficult or costly. Here they are.

1. Have a clear, written no-tolerance policy on harassment. The policy should describe what harassment is, what each employee’s responsibility is, what to do if they observe or experience harassment, and that harassment will not be tolerated.

2. Distribute and communicate the policy to all employees. This should be covered in face-to-face meetings with existing employees, and covered in new employee orientation.

3. Have a reporting mechanism in place should harassment occur. Who should they contact? There needs to be alternative contacts.

4. Train all supervisory staff what to do if they become aware of harassment. Supervisors must understand that they must act if they become aware of harassment even if they don’t think it is a big deal themselves.

Those are the essentials. I would also recommend conducting periodic training for all employees and supervisors at least bi-annually. Additionally, offering an employee assistance plan can be a good resource for employees if they are experiencing any form of harassment.

If harassment is reported, take swift and appropriate action. Keep confidentiality as much as possible. Document everything.

We at Your Own HR Pro have extensive experience developing harassment and respectful workplace policies, providing training, and conducting investigations. Please don’t hesitate to call us should you need assistance.


Please visit our website at http://www.yourownhrpro.com/