Common Overtime Mistakes

The overtime laws and policies in the country can get quite tricky. The concept may seem straightforward, but the actuality is far from simple.

The Federal Fair Labor Standards Act (“FLSA”) obligates all employers to pay for every hour their employees work over 40 hours in a workweek. Besides, all employees are entitled to overtime pay unless employers can prove an exemption.

But the experienced Chicago business lawyers of Bellas & Wachowski regularly consult with employers to avoid making overtime errors leaving employers exposed to expensive litigation.

Here are ten common mistakes that most employers make, costing them time, money, and reputation:

The overtime compensation differs from one state to another all over the country. State laws are very distinct from federal laws, the ones defined by the Fair Labor Standards Act (FLSA). So which must you follow? It is best to comply with those that are more stringent and protect employee rights more strictly.

Special overtime compensation laws may apply if the workers are employed as law enforcement officers, fire protection workers, tipped employees, or are under the federal government.

Employers cannot reduce an employee’s salary or overtime based on their work quality or quantity. Neither can you boost their title to put them under an exempt policy, nor can you shrewdly misclassify the employee thinking they may never find out. Upon finding out, employees can file lawsuits to recover their lost wages. It can be seriously damaging for your business.

At times, employers claim that salaried (not hourly) employees are not entitled to overtime compensation. However, overtimeis paid to all eligible salaried employees based on the hours they work or are expected to work. The overtime compensation depends on whether the work hours fluctuate or remain the same.

We have seen employers giving their employees fancy titles to claim they are exempt from overtime laws. However, that is not fair. To be considered exempt, the employees must retain executive, administrative, or professional capacities and earn above the standard threshold.

As an employer, you are mandated to maintain a precise payroll record. Not doing so may wreak havoc while calculating overtime amounts. The FLSA necessitates every employer to retain at least 2 years of employee information, including wage computation, work schedule, wage rate table, and additions/ deductions.

Maintaining such records is always a smart move since it acts as evidence if you ever have to deal with a lawsuit.

Non-exempt employees must receive compensation for the duties they render, and employers cannot require or allow off-the-clock responsibilities. Thus, one must have a policy that has controls in place to prevent off-the-clock work. Be strict and precise on the overtime and off-the-clock work policies to avoid penalties.

In many cases, the auto-deduct meal policy may go against state and federal laws. Employers use it to reduce payroll costs. However, if the employee has worked through the meal breaks, employees cannot escape their obligation.

Comp time (compensatory time), also known as banking hours, allows employees time off in place of receiving overtime compensation. It is a clever move from employers, particularly in the private sector, to save themselves from paying overtime wages. But employees, on the other hand, lose thousands of dollars of deserved payment. Besides, banking hours aren’t applicable if the employee has been fired or quits the organization.

If you are thinking of proposing the comp time offer to your employees, think again. Many states prohibit doing so as it violates labor laws. Even if both parties agree, comp time policies violate if the state doesn’t permit the same.

Regardless of whether or not the overtime was pre-authorized, a non-exempt employee must be compensated. No policy can allow employers from withholding owed payments saying the overtime is not payable unless authorized.

The regular commute isn’t compensable. Travel time as part of employee’s principal activity and one that isn’t home to work commuting time is compensable. If the employee is to report to a designated site for picking materials, equipment, or other supplies, the work time starts when the employee reaches that location.

Don’t let your business get caught in overtime compensation mistakes. We have regularly seen how one complaint by a disgruntled employee triggersa series of audits and gets you caught in the wage and hours trap. Reviewing your wage practices is an excellent way to calculate and pay employees the overtime pay they deserve.

If you are still committing errors, you must understand that it is the employer’s liability for any overtime pay made inappropriately. A regular review of your employment practices helps avoid mistakes and ensures having satisfied employees.

The experienced Chicago business lawyers of Bellas & Wachowski are amongst the most trusted employment lawyers in the Chicago area. Contact us if you are experiencing any legal issues concerning overtime wage issues and other employment issues. We welcome your questions to keep you apprised of the laws and how you can protect your legal rights. Use the chatbox on the right and send in your inquiry for better assistance.