Category: <span>Unpaid Wage or Overtime</span>

The importance of maintaining organized personnel files is widely overlooked. Many employers, however, are unaware of federal and state laws that require employers to maintain personnel records for various time periods. Maintaining proper personnel files will avoid fines for noncompliance and also become the foundation for defending against unfounded claims of wrongful termination, unpaid overtime or unfair denial of a job application or promotion opportunity. Incomplete personnel files, however, may turn into evidence for the plaintiff in a lawsuit.

In a March 2013 decision of the U.S. Circuit Court of Appeals, Eleventh Circuit, the court rejected arguments of a hurricane shutter company that 7 undocumented workers were not entitled to recover unpaid overtime compensation based merely on their status as “undocumented”.   To the contrary, the court held that undocumented workers were covered as “employees” under the FLSA and, therefore, were entitled to damages in an amount equal to twice their unpaid wages. The court also rejected arguments that the workers could not recover based on their own failure to report income to IRS and their use of false Social Security numbers; the court reasoned that the workers did not actively participate in the particular unlawful activity at issue in the lawsuit. Also noteworthy, the court held that two of the company’s directors were liable as individuals even though they were not officers of the company because the directors exercised “sufficient operational control” over day-to-day operations for such liability.

Except for the breaks required for minors and the newly required lactation breaks for mothers after the birth of a child, employers are not generally required to offer work breaks. But for employers that do give their employees a break, they must follow strict rules to avoid unpaid overtime lawsuits. For example, an employer must continue to pay employees if a “rest break” is 20 minutes or less, and also if a “meal break” is less than 30 minutes. Employers still need to pay for meal breaks where the employee is not completely relieved of duties for the entire break. Having employees acknowledge in writing the time taken for breaks is essential to avoid costly litigation over false claims.

Often employers believe that hourly employees don’t have to be paid for time spent away from their regular duties and travelling between work locations or attending work functions and seminars. However, wage and hour laws contain very technical rules that govern when an employee must be paid for travel times before, during, and after an employee’s regular work day. Employers who are unfamiliar with these legal requirements could face liability for up to 3 years of unpaid regular and overtime wages.

Because the FLSA (federal wage and hour law) requires payment for all time that nonexempt workers are “suffered or permitted” to work regardless of whether it is recorded on a time sheet or whether it occurs outside of a scheduled workday, employers should implement training and policy to avoid all “off-the-clock” work. The following are some preemptive strategies that may be appropriate to implement: 1) Revise employee handbooks to communicate that all time must be recorded and that the company has zero-tolerance for violations and prohibits any retaliation against those who report violations; 2) Re-train all management and supervisors to notify them that they cannot require, encourage or even suggest that a nonexempt employee work off-the-clock; and 3) Require timesheets with signed acknowledgement from each employee and supervisor that all time worked has been recorded.

It is difficult for administrative staff with part-time H/R duties to intuit the right answer to payroll requirements under the FLSA (Fair Labor Standards Act). Properly classifying employees as “exempt” or “non-exempt”, determining payroll deductions and calculating the correct “regular rate” for overtime require technical knowledge of DOL regulations and Opinion Letters. For example, the time an employee spends on work-related travel is generally not compensable if done outside of regular work hours, but is compensable (possibly at a lower rate) if during work hours even if on weekend days. Employers should develop such payroll policies in consultation with counsel to avoid paying thousands in attorney fees to resolve minor underpayments for “technical” violations.

Wage and hour lawsuits are still among the most frequent claims by current and former employees. Resolving such claims with out-of-court settlements cannot be guaranteed because the federal wage and hour law (“FLSA”), like many employment statutes or related regulations, does not allow employees to waive their rights to receive full relief without court approval or Department of Labor supervision. One judge in the Middle District of Florida cautioned that “an employer undertakes a private resolution of an FLSA dispute at his peril” because the employer remains liable for any unpaid wages, attorney’s fees, court costs and liquidated damages that may be “compromised” in such a settlement.

Many employment statutes or related regulations prohibit or limit the right of employees to waive statutory rights. For example, employees may not waive their rights to receive minimum wages or overtime pay under the Fair Labor Standards Act without court approval or Department of Labor supervision. Similarly, regulations issued under the Family Medical Leave Act provide that employees cannot waive their FMLA rights. Certain procedures must be followed for employers to obtain a valid waiver of potential age discrimination claims under the Age Discrimination in Employment Act. Employers may not be getting a valid waiver of such claims with do-it-yourself general releases.

To have unpaid interns, employers must comply with six federal legal criteria. Three such criteria most often overlooked are: (1) internships must pertain to the training unpaid interns receive at their vocational schools, (2) employers must not receive immediate advantages by having such interns, and (3) unpaid interns must not displace paid workers. If any of these or the other three criteria are not satisfied, the intern will be considered an employee and they must be paid minimum wages and overtime. An official at the Labor Department has warned that there are few circumstances in which a for-profit employer can have an unpaid intern and still comply with the law.

Calculating overtime pay is more complicated when employees tend to work longer shifts toward the end of an established workweek than at the beginning of that workweek. The amount of overtime may depend on where the workweek begins. Most employers utilize form policies that establish Monday through Sunday workweeks. This standard designation may not be best suited to minimize a particular company’s overtime responsibility. Employers are not required to designate workweeks in order to maximize overtime pay. However, a decision to change an established workweek policy and the implementation of any such change should be handled with care.

The Fair Labor Standards Act (FLSA) does not require employers to provide an extra day off for employees that work on holidays. For employers that elect to establish such a holiday policy, that policy should be consistent with any other relevant state or local laws, employment contracts, and collective bargaining agreements. Some questions that should be answered in the holiday policy include: how does an employee qualify for the extra day off? How quickly must the extra day be taken? And, how many days must they work to become eligible?