Companies both large and small are finding themselves in legal battles against employees for not complying with overtime laws as outlined in the Fair Labor Standards Act of 1938 (FLSA). The complex regulations found in the FLSA code governing proper payment of wages is overseen by the Department of Labor and can result in hefty fines, or possibly prison time, for multiple violations. In this and subsequent posts, we will look at some of the potential pitfalls, guidelines and laws governing wages as outlined in the FLSA.

The Department of Labor states the following on their website:

The Fair Labor Standards Act (FLSA) establishes standards for minimum wages, overtime pay, recordkeeping, and child labor. These standards affect more than 100 million workers, both full‑time and part‑time, in the private and public sectors.

The Department of Labor uses a variety of remedies to enforce compliance with the Act’s requirements. When Wage and Hour Division investigators encounter violations, they recommend changes in employment practices to bring the employer into compliance, and they request the payment of any back wages due to employees.

Willful violators may be prosecuted criminally and fined up to $10,000. A second conviction may result in imprisonment. Employers who willfully or repeatedly violate the minimum wage or overtime pay requirements are subject to civil money penalties of up to $1,100 per violation.

Recent Lawsuits

A New Jersey federal court jury unanimously awarded $2.5 million to Staples, Inc. employees in a class-action lawsuit for failing to comply with the laws that require the correct classification of employees (e.g. exempt or non-exempt) and paying for overtime wages. In another case, Valero Energy Corp. is currently involved in a class-action lawsuit that seeks $100 million in damages. The suit, brought on by three current employees, alleges that Valero required employees to work overtime hours “off the clock” without compensation.

As an employer, it is important that all wage and hour laws are adhered to, including payment of overtime and the pay-out of bonuses.

Understanding California Overtime Hours

While the Federal standards of the Act are complicated enough, California employers must adhere to a different set of guidelines. Most fundamentally, California requires that all hours worked in excess of eight (8) regular hours in one workday or forty (40) regular hours in one workweek will be treated as overtime. Non-exempt hourly employees are compensated as follows for working overtime:

• Time and a half the regular rate of pay for hours worked beyond eight (8) in a workday;
• Double the regular rate of pay for hours worked beyond twelve (12) in a workday;
• Time and a half the regular rate of pay for the first eight (8) hours worked on the seventh consecutive workday in a workweek;
• Double the regular rate of pay for hours worked beyond eight (8) on the seventh consecutive day worked in a workweek;

Time and a half the regular rate of pay for hours worked beyond 40 in a workweek. There is no “pyramiding,” which means you will not be paid overtime twice for the same hours of work.

Outsourcing Solutions

Considering the complex laws and potentially expensive implications of non-compliance, many employers have elected to outsource the management of their FLSA compliance to outside experts who specialize in these laws. Human Resources specialists recognize violations and can offer immediate solutions to remedy them. Additionally, most small business owners are unable to remain abreast of developing laws and changing regulations. In contrast, Human Resources Outsourcing firms are constantly on the lookout for new laws that my impact their clients, and can quickly implement them. We encourage you to investigate the benefits of outsourcing your payroll and wage compliance to an HR Outsourcing firm familiar with the laws in your state. Contact us for more information.

In our upcoming posts, we will examine how overtime laws impact Bonuses and how to calculate overtime pay based on a sample workweek.

Contributed by: Thi Ha and Monique Stennis, CPEhr