All too frequently employers make news headlines for violating wage and labor laws. A recent example was Rocket Mortgage which made headlines for allegedly failing to pay their employees overtime wages.
Since 1938, American workers have been protected by what is commonly known as the “mother of all employment laws,” the Federal Labor Standards Act (FLSA). Under FLSA, employers can easily find themselves unknowingly out of compliance by miscalculating overtime, unfairly rounding time clock punches, and docking pay. Even if your business does not directly violate the terms of this act, you could still face a lawsuit if you don’t fully adhere to its policies.
As a business owner, how confident are you in your organization’s ability to comply with the provisions of the FLSA? Below, we outline a sampling of the most common workplace violations. To avoid fines and legal fees, it’s important to keep up with this and other labor laws and regulations — or partner with an HR firm that can help.
Confusing Exempt and Nonexempt Employees
Pop quiz: Does the FLSA uniquely protect exempt or nonexempt employees? Answer: The FLSA protects nonexempt workers, who must receive overtime, a standard minimum wage, and other basic protections.
Exempt employees are excluded from these requirements, though the U.S. Department of Labor requires that they earn a minimum of $684 per week or $35,568 per year.
The point is that businesses must ensure that their nonexempt employees receive fair compensation. Failing to provide overtime pay, for example, is a violation of the FLSA and can result in fines or penalties. One helpful guideline to always remember with FLSA is this: Employers must pay for ALL hours worked.
Does your business include hourly employees? If so, the FLSA permits you to round employee shift time up or down to the nearest interval.
The FLSA does not contain an exact provision for the amount of time you can round, only suggesting that most businesses round up or down to the nearest 5-minute or 15-minute intervals. If an employer decides to incorporate the rounding rule contained in the regulation, it must be utilized in both manners. A company, for example, cannot just apply a rounding down approach, while excluding any rounding up of time.
Adding more clarity to this, the FLSA clearly states that a rounding policy must not be “used in such a manner that it will not result, over a period of time, in failure to compensate the employees properly for all the time they have actually worked.”
Some companies avoid this problem altogether by leveraging digital tools to eliminate rounding. Otherwise, you may face problems if you consistently round down the time employees work, resulting in a loss of compensation for the accumulated time worked.
Treating Contractors as Regular Employees
Contractors offer business owners great flexibility by fulfilling a specific role without falling under the same controls and protections as regular employees. But some businesses make the mistake of placing too many requirements on contractors, effectively treating them as employees.
As a rule of thumb, anytime you tell a contractor when and how the work will be performed, you are treating them as an employee.
Contractors are given protections that include things like workers’ compensation insurance and may be entitled to the same benefits as regular employees. Failing to honor these requirements can result in major problems.
For example, an Arizona auto parts distributor failed to make the distinction between contractors and employees, and the Department of Labor ruled that the company violated the FLSA by failing to keep proper records, requiring workers to use their personal vehicles for deliveries, and failing to provide overtime pay.
It’s important to have clear distinctions in the way that contractors are classified — as well as the way they’re treated.
Failure to Retain Records
Business owners must maintain data on all of their nonexempt employees.
This data includes:
- Date of birth
- Social Security Number
- Number of hours worked each day
- Total hours worked each week
According to the Department of Labor, these records must be kept for at least three years. Otherwise, business owners could face stiff penalties that include fines or imprisonment.
Employee Overtime and Work Breaks
The FLSA contains specific provisions for how you honor your employees’ time. Technically, employers have no federal requirement to offer lunch/meal breaks — though states can differ on this requirement. But if you do, the requirements vary based on the length of the break.
If you offer a 30- or 60-minute meal break, you are not required to compensate the worker for that time. But short breaks (5- to 20-minute breaks) require employers to compensate their employees for the break time.
Additionally, the FLSA ensures that all nonexempt employees receive overtime pay for any hours worked over a 40-hour workweek. This overtime pay must be 1.5 times regular pay. And yes, it is illegal to redefine the workweek as 45 hours or more to avoid this requirement.
Need Help with FLSA Compliance?
Keeping up with FLSA requirements can feel like a full-time job in itself. That’s where it helps to have an HR firm on your side. Focus HR offers industry-leading guidance to help businesses understand the challenges of attracting, retaining, and managing top talent. For a free consultation, contact Focus HR today.