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We’ve compiled a list of the 100 most commonly asked questions we have received on the federal Fair Labor Standards Act (FLSA) overtime regulations.
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This report, "Top 100 FLSA Q&As", is designed to provide you with an examination of the federal FLSA overtime regulations in Q&A format, including valuable tips for bringing your workplace into compliance in an affordable manner.

At the end of the report, you will find a list of state resources on wage and hour issues. This report includes practical advice on topics such as:
  • FLSA Coverage: How FLSA regulations apply to all employers and any specific exemptions from the overtime requirements
  • Salary Level: Qualifying for exemptions and nonexempt employees
  • Deductions from Pay: Deducting for violations, disciplinary reasons, sick leave, or personal leave


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July 15, 2011
Clear Policies Help Avoid Unpaid Overtime Claims

Pay attention, because Paul Lopez is about to give you some free advice. Lopez is a labor and employment attorney with Florida law firm Tripp Scott (www.trippscott.com), and with his considerable experience litigating and advising clients, his advice would be valuable at almost any price.

For a Limited Time receive a FREE Compensation Special Report on the "Top 100 FLSA Q&As," designed to provide you with an examination of the federal FLSA Overtime Regulations in Q&A format, including valuable tips for FLSA Coverage, Salary Level, and Deductions from Pay. Download Now

When it comes to avoiding problems due to overtime payments under the Fair Labor Standards Act (FLSA), says Lopez, ask yourself:

  • Do we know which employees are non-exempt?
  • Do we know exactly how much time employees are working?
  • Do we have clear, written overtime policies?
  • Do we adhere to and enforce those policies?, and
  • Do we have the employees themselves verify their time records?

The answers to these questions may seem simple. But more often than not, Lopez says, employers find themselves in hot water with the Labor Department because they don’t know the answers. Let’s take them one at a time.

Do we know which employees are non-exempt? If an employee is exempt from overtime pay, you don’t have to worry that he or she will later claim you should have paid overtime for hours he or she actually worked. But be careful that the employee is truly exempt; just saying it, even if the employee agrees, does not make it so. Carefully evaluate the duties and responsibilities of each job in your organization, and then make a determination of its exempt/non-exempt status. Thoroughly document your reasoning in the event you have to defend it someday.

Do we know exactly how much time employees are working? You may feel safe if your employee handbook explicitly states that employees may not work overtime unless it is pre-approved by their manager. But if you have employees who are expected to take a work cell phone home and answer customer calls, or work at their desk (or anywhere else) through lunch or break time, you could have a problem. “If your employees are supposed to work 40 hours a week but are routinely doing these things—working, let’s say, an extra 20, 30, 40 minutes a day—the time over 40 hours a week they spend working is compensable. They are entitled to overtime compensation under the FLSA,” says Lopez.

Even in circumstances where the employee voluntarily puts in extra time, the test is whether the extra work benefits the company. “The analysis isn’t whether the company is asking them to put in overtime; rather, it is whether it is a benefit to the company,” Lopez says. “And 99% of the time, of course, it is going to be a benefit to the company.”

Do we have clear, written overtime policies? “Many times employee handbooks and policies say an employee cannot work overtime unless it is expressly authorized by a manager. That is typical, boilerplate language in every decent employee handbook,” says Lopez. “What often happens is a lawsuit is filed, and the employee says he worked overtime and didn’t get paid for it. The company says, ‘You never had approval for that so we don’t have to pay you for it.’” But the FLSA says that the employer is completely wrong. “Even though the person didn’t get approval, and even though he didn’t get written consent from his manager to work the overtime, if he can demonstrate that he actually did work overtime, the law says he must be paid.”

Do we adhere to and enforce those policies? “After that discussion, the next question I often get is, ‘Then what is the written policy for?’ My response is always that the policy is there to be enforced. If you have an employee who is constantly, routinely taking it upon himself or herself to work extra hours even though the manager is not approving it, you need to pay the person for the hours you believe are demonstrably overtime hours worked. But, you need to discipline the employee. Either terminate the employee for violating company policy, or warn them they cannot continue to do this, and then enforce your policy. I’ve had too many companies come to me with these great handbooks, and great policies and procedures manuals, but they’re not enforcing them. They’re collecting dust in a filing cabinet, and they’re not worth the paper they’re written on.”

Do we have the employees themselves verify their time records? “One of the things a company can do is to require their hourly employees to keep a daily time sheet, and keep diligent track of the time they are actually working. Then have those employees personally sign off on their daily time sheets. Another mechanism is to not allow employees to use company cell phones or pagers or blackberrys after hours. Have the customers wait until the next business day. If that’s not realistic, I would say if the company wants to have employees fielding those customer calls and providing that kind of customer service, that’s fine. But monitor it, track it, and be realistic about how much time the employee worked after they had punched out.

“If the employee says he or she worked an extra 2 hours that night, but you can tell by your records and the type of work the employee does that they were logged onto the computer for 20 minutes and had a 15-minute cell phone conversation, how on Earth would they have worked 2 hours? All of these things become much more powerful evidence a company can use to rebut an employee’s claim that they were working 60 hours a week.”

Some overtime situations arguable

Deciding about overtime pay can become more complicated in some situations. “This is a very general analysis, and each situation should be examined individually, but if the employee is essentially waiting on calls such that he or she can’t really engage in his or her normal, day-to-day activities while they’re waiting, then generally that’s going to be deemed compensable time. It’s actually a very fact-intensive inquiry, and there are no easy answers,” Lopez says. On one end of the spectrum is the firefighter who must wait at the stationhouse all day every day during his 3- or 4-day period of service. “That’s clearly compensable. But someone who takes home the cell phone and sometimes gets a call and sometimes doesn’t, that could be argued. It really depends on the nature of the work, and how put out the employee is by waiting on the calls.”

It’s important to get this right, Lopez says, because the potential for penalties is huge. “I like to use an illustration that $1,000 of unpaid overtime claims could cost your company $100,000. The law says the employee is entitled to the unpaid overtime plus liquidated damages equal to that amount. Then, the employee also gets his or her attorney’s fees and costs. I usually tell clients, unless you have what you believe and what we believe is a rock solid defense, or at least a very strong one, you have to settle these cases because it is so cost-prohibitive to litigate them. The exposure can be so great and the results so uncertain; don’t let the plaintiff’s attorneys rack up a lot of time prosecuting a claim. Nip it in the bud and move on.”

Lopez’ final words of advice? “You want employees to work hard. You want them to be diligent and provide good customer service. You want them to go that extra mile. You just have to pay them for that; don’t be penny-wise and pound foolish.” Good advice.

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