THE OVERTIME TRAP
 
Here is the simple bottom line: if your employees deserve it, pay them their overtime! This decade has seen an unprecedented explosion of litigation over failure to abide by state and federal wage and hour laws. Lawyers estimate that companies have collectively paid out over $1 billion each year in settlements.
 
The judgment and settlement amounts borne by large and small businesses alike are staggering because these laws are so widely and easily violated. Below you can find out what every employer must know to avoid getting caught in the trap.
 
THE PROBLEM

Nearly 90% of the American workforce is covered by overtime provisions of the Fair Labor Standards Act (FLSA).  Contrary to popular belief, they apply to both hourly and salaried workers. 
 
Although the statute was part of New Deal legislation in 1938, accusations of wage and hour violations are prevalent today for many reasons. As business shifted from manufacturing to services over time, and as job tasks became more standardized, more employees were covered by the FLSA. 
 
In addition, the advent of telecommuting devices such as mobile e-mail has enabled the workday to begin before arriving at the office, and to spill over into evenings and weekends. The issue of when the workday begins and ends is a complicated one that usually weighs in the employee’s favor.
 
THE EXEMPTIONS
 
The FLSA contains special exemptions for certain groups of employees:
 
  • EXECUTIVE. A manager who supervises at least two employees, and has authority to hire, fire, and promote, is not entitled to overtime.
  • PROFESSIONALS/CREATIVES. This group requires advanced training, a professional degree, or artistic imagination.
  • OUTSIDE SALESMEN.   If the salesman is regularly away from the employer’s place of business, there is no right to overtime.
  • ADMINISTRATIVE. These employees must exercise “independent judgment” in their jobs.
 
Generally, under the administrative exemption, workers with jobs that require independent judgment have not been entitled to overtime pay. Nonetheless, this definition is elusive because wage and hour claims are no longer unique to the blue-collar labor pool. The historical expansion of the middle class has given rise to claims by college-educated, white-collar employees such as computer workers, stockbrokers, and even store managers. 

DO ANY EXEMPTIONS APPLY TO ME?
 
The qualifying employee pool can include a large breadth of your employment infrastructure, from system engineers to customer service personnel. Ultimately, you should focus on what your employees actually do, not on their job titles, income, manner of compensation, or academic degrees. 
 
DO I HAVE TO PAY OVERTIME TO AN INDEPENDENT CONTRACTOR?
 
You do not have to worry about overtime if you only employ independent contractors. However, be sure not to misclassify them as exempt from the wage and hour laws if they truly are employees because they will be entitled to overtime. 
 
There are many factors that play into which category your workers fall, such as form of payment, extent of the employer’s control over the job duties, and receipt of benefits in addition to wages. Again, the concern is not about the title of independent contractor, but the tasks that your workers must actually perform. 
 
Because the stakes are extremely high, there is no reason to continue to expose your company to such heavy ticket liability.  A qualified PEO can help you reduce your exposure and let you get back to the business of running your business.  To learn about the many benefits of employee leasing and how a PEO can reduce your employers’ liabilities, please visit www.peo7.com.