When The Fair Labor Standards Act
(FLSA) was enacted in 1938, it was
to ensure workers a living wage via the minimum wage requirement; to protect
children from hazardous working conditions by limiting their working hours and
prohibiting certain types of work; and to
encourage more hiring via the disincentive
of mandatory overtime pay. Record-keeping requirements were included to provide
evidence of compliance, and there is a
poster employers are required to display.
Today, employers can find themselves in
trouble by ignoring the law’s requirements,
incorrectly applying the rules, or failing to
consider more protective state and local
laws, says Audrey Mross, who leads the
labor and employment practice group at
the Dallas-based law firm of Munck Butrus
Carter, P.C. We asked her to help steer us
through the thicket of laws and regulations.
Do employers only need to be mindful of the
federal wage and hour law?
No. Employers who are not in interstate
commerce will look to state law and possibly local wage and hour ordinances.
Businesses in interstate commerce need
to be aware of the requirements of all
three. For example, if an FLSA-covered
employer has employees in a state with a
minimum wage that exceeds the current
federal standard of $5.85 per hour, the
employee is entitled to the higher state
minimum wage. You can find a complete
list of state minimum wage rates at
www.dol.gov/esa/minwage/america.htm.
Are there many such local ordinances?
Yes, and they are increasing in numbers,
although last year’s increase in the federal
minimum wage may slow the spread. Years
ago, these so-called ‘living wage’ ordinances applied to employers who did business with the local government. Today,
many of these laws are not conditioned
upon being a contractor with local government (see Albuquerque, N.M.). Instead,
they may apply to any business within a
specified geographic area (see Santa
Monica, Calif.), and some have a two-tier
approach, mandating a higher wage if the employer does not offer employee health
insurance (see San Diego, Calif.).
What about overtime pay?
Under the FLSA, an employee is entitled
to 1.5 times the ‘regular rate’ for time
worked in excess of 40 hours in a work-week. While that hasn’t changed, several
states, including Alaska, Calif. and Colo.,
and Puerto Rico and the Virgin Islands
require overtime to be paid on a daily basis
or at more than 1.5 times the regular rate. A
bill in the 2007 session of the Texas
Legislature proposed daily overtime for
day laborers, but the measure was not
enacted. We may see a similar bill in 2009.
What is the workweek?
The employer defines its own workweek.
It’s a period of seven consecutive 24-hour
days, which should be published in the
employee handbook so that everyone
knows when overtime is earned. In states
with daily overtime, the workday should be
similarly defined. Many employers mistakenly think overtime is paid at 1.5 times the
worker’s hourly or ‘straight time’ rate.
That’s correct if no additional pay, such as
shift differentials or productivity and attendance bonuses, is offered. However, if other
pay is received, those amounts are included
in the regular rate upon which overtime is
based. Don’t let the exclusion for discretionary bonuses fool you; their definition of
‘discretionary’ is not the same as yours.
What are other common employer mistakes?
One is misclassification of some contractors and nonexempts as exempt, which
results in the failure to keep records of time
worked and, often, failure to pay overtime.
Once the misclassification is shown, there
is usually no time record to rebut the worker’s sometimes-inflated opinion of how
many hours were actually worked, making
back-pay settlement amounts unduly large.
A similar problem occurs when the
employer fails to capture and pay for all
time worked by nonexempt employees.
This can happen where an employee
works ‘off the clock’ due to improper
recording of meal breaks and when work
starts and stops each day. Employers
should not automatically dock an hour of
pay each day for lunch, unless agreed to in
a collective bargaining agreement. They
should not allow employees to work at
home or come in early, unpaid, and chalk it
up to ‘showing initiative.’ They should not
use the ‘manager override’ feature on automated time-keeping systems to reduce
recorded hours when they feel an employee goofed off or otherwise did not give a
full day’s work. They should know the
acceptable ‘rounding’ practices under the
FLSA. Here’s a hint: If you’re always rounding down, your practice is not permissible.
Another hot area of debate is the compensability of time spent driving between
home and first and last assignments of the
day, for employees who work in the field
out of their own cars or company-issued
service vehicles.
AUDREY MROSS is a shareholder and leads the labor and employment practice group at the Dallas-based law firm of Munck Butrus
Carter, P.C. She chairs the Employee Relations committee for the Dallas chapter of the Texas Association of Business and is on the TAB’s
board of directors. Mross pens a monthly update on employment issues called Legal Briefs for HR. To be added to the e-mail group,
send your request to [email protected].