When it comes to employee compensation, Focus HR finds that many businesses don’t know the rules about hourly and overtime pay. It turns out there’s no better time to learn because the rules, under the Fair Labor Standards Act (FLSA,) are changing and a failure to follow could cost you dearly!
The FLSA has been in place since 1938, dictating our nation’s minimum wage, overtime pay, and child labor protections. Employers who willfully or repeatedly violate the minimum wage or overtime requirements are often fined up to $2,014 per violation, per person.
Make no mistake: the U.S. Government is enforcing FLSA with vigor, having increased the filing of wage and hour lawsuits by 417% since 1997.
In 2017, the Wage and Hour Division of the U.S. Department of Labor (DOL) filed a whopping 8,261 FLSA lawsuits. 72-percent of the money collected that year (i.e. over $2 billion) was for FLSA violations, and 83-percent of that, specifically, was for overtime violations.
When it comes to wage and hour disputes, employers are more at-risk for FLSA overtime prosecutions than anything else.
In a nutshell, under FLSA, non-exempt employees must receive one-and-a-half times the employee’s regular rate of pay for all hours worked over 40 in a workweek. Many employers think that the hourly rate is the same as the regular rate of pay, but that’s not true. In fact, nine out of ten business owners and managers don’t know the difference.
- Hourly Rate= the employee is paid one amount for each hour (up to 40 hours) worked per week.
- Regular Rate= the hourly rate PLUS all other forms of compensation per week, which is then divided by the actual number of hours worked in the week.
- Total Pay= all payments you make to, or on behalf of, the employee. This includes shift differential, non-discretionary bonuses (i.e. bonuses promised to employees before the work begins,) promotional bonuses, and cost-of-living adjustments.
Here’s a resource with more detailed information.
Well now, the DOL wants to amend 29 CFR part 778 to clarify and update regular rate requirements under section 7(e) of the Fair Labor Standards Act (FLSA.)
Currently, employers are discouraged from offering more perks to employees since it may be unclear whether those perks should be calculated into the regular rate of pay. The proposed rule would clarify this and, since these regulations haven’t been updated in decades, would better define the regular rate for today’s workplace practices.
Confused yet? Unfortunately, claiming ignorance of the law won’t help you in court. You need to take a hard look at your business practices and make sure you aren’t violating any rules.
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