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Please join us in welcoming back Elizabeth Milito to your Small Business Online Community for the second part of this two part event on SBOC. Elizabeth is back to guide you through the basics of the Fair Labor Standards Act, the federal wage and hour law. Today, Elizabeth will be using the screen name NFIBLegal.

About Elizabeth

Elizabeth Milito is Senior Executive Counsel for the Small Business Legal Center at the National Federation of

Independent Business (NFIB), the leading small business association. A nonprofit, nonpartisan organization founded

in 1943, NFIB represents the consensus views of about 350,000 members in Washington D.C., and all 50 state

capitals. Milito is a frequent author, speaker and advisor on all aspects of the employment relationship and

compliance with employment and labor laws, including wage-hour issues, independent contractor classifications,

sufficiency of employee handbooks and proper hiring procedures.

To all Community Members

If you have questions for Elizabeth, post it here by simply hitting reply and then refresh your browsers often to

view Elizabeth's responses. She will try to answer as many of your questions as possible.

Binding arbitration clauses can be beneficial for employers, in that they can minimize legal exposure and costs and expedite resolution of disputes. But before you have an employee sign an employment contract that contains a mandatory arbitration clause you should have an attorney review the document. Many states either through statute or court interpretation have limited what employers can and cannot say in mandatory arbitration clauses.

Bob's rate of pay, a non-exempt employee, is $10 per hour or $400 per workweek. Bob's overtime rate is 1.5 x regular rate of pay = $15/hour overtime.

Assume Bob works 45 hours in week 1 and 50 hours in week 2.

Week 1:

Regular pay of $400 ($10 x 40 hrs.)

Overtime pay of $75 ($15 x 5 hrs.)

Week 2:

Regular pay of $400 ($10 x 40 hrs.)

Overtime pay of $150 ($15 x 10 hrs.)

Cindy is more complicated because Cindy performs two jobs for her employer - she works as both a janitor and cook. Therefore, you need to calculate overtime based on different hourly rates.

Janitor Rate $8.50 Janitor Hours 21

Cook Rate $9.00 Cook Hours 26

21 hours x $8.50 = $178.50

26 hours x $9.00 = $234.00

$412.50

$412.50 / 47 hours = $8.78 (Regular Rate)

$8.78 x 0.5 = $4.39

$4.39 x 7 hours = $30.73(Overtime Due)

Why all the court activity? It's easy to get wage and hour law wrong - statistics show that most employers are not in compliance.

There are two areas that are frequently targeted by plaintiffs' attorneys when it comes to wage and hour claims.

First, misclassification of employees. In this scenario the employee challenges and employer's decision to classify the employee as exempt and the employee claims she is owed overtime for all hours worked over 40.

Off-the-clock activities is the second area targeted. This means the non-exempt employee has performed work but has not been paid for the work. Off-the-clock work occurs in one of two ways. Voluntary (employee choice) and involuntary (manager orders or suggests) - both are unlawful. The impact is that an employee is not paid what he is owed.

Your biggest wage and hour risks often come from your best non-exempt employees. They frequently volunteer for extra duties, answer phones while eating lunch, agree to run errands after work, etc. But all it takes is for one bad incident and the employment relationship goes south and now your best non-exempt employee is sitting in the office of a lawyer figuring out how to get paid for all those lunch breaks that weren't really breaks because they were answering the phone and responding to e-mails.

Non-exempt employees should complete timesheets or time cards. It is important that this information be accurate since it forms the basis of your overtime calculations and will also defend your business if presented with a wage and hour complaint.

With regards to employees who work unauthorized overtime - it is your duty to see that work is not performed if you don't want the work performed.

For more details on wage and hour record keeping requirements, you should go to www.dol.gov/esa/whd. The U.S. DOL's website lists employer record keeping requirements (and there are many!). So make sure you are in compliance.