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    18 Replies Latest reply on Aug 27, 2009 2:57 PM by SBC Team

    Event 8/27: Overtime: How Much?

    SBC Team Guide
      Some experts believe that as many as 90 percent of employers are not fully complying with wage and hour laws. This may explain why wage and hour claims are on the rise - and why these claims are being more actively pursued by plaintiffs' attorneys.

       

      To help reduce your chance of being a target and to increase your chance of successfully defending yourself against an overtime lawsuit, Elizabeth Milito, Senior Executive Counsel with the National Federation of Independent Business (NFIB) Small Business Legal Center and an expert on employment issues, will guide you through the second of a two-part series covering the basics of the Fair Labor Standards Act, the federal wage and hour law.

       


      The event on August 27th, focuses on determining which employees get overtime. This week Milito will cover a host of overtime calculation issues that have become pitfalls for employers and goldmines for plaintiffs' attorneys. Topics covered include:

       

      • Calculating wages under the FLSA - and the wage and hour principles frequently targeted by plaintiffs' attorneys.
      • Provide practical examples of work and non-work time, including on-call time, travel time, training time, and time spent responding to emails at home.
      • Answers to your other general wage and hour questions.

      About Elizabeth Milito

      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. She previously served as an editorial reviewer for the ABA's Guide to Workplace Law.

      Elizabeth will be live on SBOC on August 27 at 2:00 p.m. EST. However, if you can't participate at that specific day/time - you can post a question now and check back during or after the event for Elizabeth's response. Elizabeth will try to answer as many questions as possible on the 27th, but may not get to all of them. Note, you do not need to register for the event. You simply need to be a member of SBOC to post a question. If you don't have a user ID, join now, it's free.

      For more tips on participating in events click here:
      Tip:  How to participate in SBOC Events
        • Re: Event 8/27: Overtime: How Much?
          MoveForward Scout
          Love this Small Business Online Community forum. I now spend my down time, in-between waiting on a client or while waiting on an event to end on this site. I get the chance to be with others who understand Small Business, learn from the forums, help those who are starting out as lost as I was once, and receive additional education. This is my new "Silent Partner".
          THANKS!
          • Re: Event 8/27: Overtime: How Much?
            MajorNathan Newbie
            In your last session you had said that hiring people as contractors might not be the best strategy for employing people. To expand on this, if contracting with someone can be over-ruled, is it worth putting "binding arbitration" clauses in the employment agreements to limit employment liability exposure??
              • Re: Event 8/27: Overtime: How Much?
                NFIBLegal Newbie

                You raise several good points. You do not want to be sued for illegally classifying workers as independent contractors when they are, in fact, employees. Misclassified employees can sue for overtime, workers' compensation insurance and other benefits. When is doubt about the status of a worker, it's a good idea to check with an employment law attorney or your CPA.

                 


                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.
              • Re: Event 8/27: Overtime: How Much?
                SBC Team Guide

                Community Members,

                 


                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.
                  • Re: Event 8/27: Overtime: How Much?
                    NFIBLegal Newbie

                    Thank you for inviting me back this week. I just want to take this opportunity to remind everyone that last month, July 24, the federal minimum wage was increased to $7.25. Also keep in mind state and local laws may have different requirements and should be consulted. Many states have higher minimums than the federal law. So you need to follow whichever law gives employees greater benefits. Also, if you are subject to a collective bargaining agreement your employees may have additional rights.
                      • Re: Event 8/27: Overtime: How Much?
                        SBC Team Guide
                        Calculating overtime seems pretty easy, as a business owner what pitfalls could I possibly encounter in calculating overtime payment for my employees?
                          • Re: Event 8/27: Overtime: How Much?
                            NFIBLegal Newbie
                            Under the federal wage and hour law (the Fair Labor Standards Act), which is enforced by the U.S. Department of Labor, non-exempt employees (i.e., generally the employees who are paid hourly) must be compensated for all time worked. The FLSA does not limit the number of hours that nonexempt non-minor employees can work in any week and does not prohibit requiring overtime. It only regulates how that time must be paid. Generally, you can require employees to work as much overtime as needed, assuming there is no collective bargaining agreement or other contract restricting the extra hours.

                            So to calculate payment for non-exempt employees you need to go through four steps:

                            1. Determine the employee’s workweek
                            2. Determine the hours worked
                            3. Determine the employee’s regular rate of pay
                            4. Calculate overtime pay

                            One of the biggest FLSA mistakes employers make is failing to calculate all time worked. For instance not paying employees for time answering e-mails at home, for travel time or training time.

                            Another frequent mistake involves offering comp time in lieu of overtime or offering straight time in lieu of overtime. Non-exempt employees are entitled to be paid 1 ½ times their regular rate of pay for all hours over 40 in a 7-day work week.
                      • Re: Event 8/27: Overtime: How Much?
                        SBC Team Guide

                        While Elizabeth responds to MajorNathan's question, please remember to refresh your screens. And remember to post your questions.
                        • Re: Event 8/27: Overtime: How Much?
                          SBC Team Guide
                          You walked through the steps to calculating overtime, can you provide a specific example of how OT can be calculated correctly and incorrectly?
                            • Re: Event 8/27: Overtime: How Much?
                              NFIBLegal Newbie

                              Let's use "Bob" and "Cindy" as our hypothetical employees to work through calculating an employees regular rate, which is then sued to calculate the overtime payment.

                               


                              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)
                            • Re: Event 8/27: Overtime: How Much?
                              SBC Team Guide
                              What are the typical things that plaintiff attourney's seek when pursuing legal recourse from business owners?
                                • Re: Event 8/27: Overtime: How Much?
                                  NFIBLegal Newbie

                                  Wage and hour claims under the FLSA have tripled since 1997. FLSA collective actions outnumber all other federal discrimination class actions combined. In 2006, wage and hour litigation rose 64% from the prior year. It's predicted that claims will continue to rise, in part because the higher the unemployment rate, the greater the number of employment lawsuits filed. Just 1.5% increase in unemployment can lead to a 21% increase in employment lawsuits. California, New York and Florida have wage and hour class claims filed daily.

                                   


                                  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.
                                • Re: Event 8/27: Overtime: How Much?
                                  SBC Team Guide
                                  How can I protect myself from litigation related to overtime? What are the documentation requirements and other things that I need to consider?
                                    • Re: Event 8/27: Overtime: How Much?
                                      NFIBLegal Newbie
                                      Accurate time records are an employer's best defense. You must be diligent in ensuring that all time worked is captured. This is true for work performed away from the premises or the job site, or even at home. If you know or have reason to believe that the work is being performed, you must count the time as hours worked.

                                       

                                      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.
                                        • Re: Event 8/27: Overtime: How Much?
                                          SBC Team Guide

                                          If hours over 40 are pretty much always considered to be OT, when would you ever pay comp time to an employee?
                                            • Re: Event 8/27: Overtime: How Much?
                                              NFIBLegal Newbie
                                              You can generally provide exempt employees with comp time. But it is illegal to give non-exempt employees comp time in lieu of overtime. Even if the employee requests or agrees to this arrangement - it's illegal. An employer may, however, discipline an employee who works unauthorized overtime. Likewise, may also rearrange employees work schedule so an employee's hours during a workweek to avoid overtime (i.e., 4 10-hour days). But beware that some states have a daily overtime standard.
                                                • Re: Event 8/27: Overtime: How Much?
                                                  NFIBLegal Newbie
                                                  I just want to close out today by reminding everyone about the importance of ensuring that non-exempt employees are paid for all time worked. This is true for work performed away from the premises or the job site, or even at home. If you know or have reason to believe that the work is being performed, you must count the time as hours worked. So consider the following activities in calculating pay for non-exempt employees:
                                                  • Preliminary and postliminary time (include security check-in, booting up the computer)
                                                  • E-mails and remote technology like blackberries and laptops
                                                  • On-call time
                                                  • Travel time
                                                  • Training time
                                                  • Meal and rest periods

                                                  Also remember the continuous work day rule applies - this means that an employee is paid from the first principle work activity performed to the last activity. So non-exempt employees are paid from when they log on to computer, even if they then run across the street to get coffee.

                                                  Thanks again for providing an opportunity to discuss this important and difficult issue.