Sunday, May 15, 2011

Small Business and the Fair Standards Labor Act

In law, nothing is certain but the expense.” ~Samuel Butler

I am by no means an advocate for more government regulation, but when in place, we all must follow the law. The Department of Labor, Wage and Hour Division administer the Fair Labor Standards Act (FLSA), and because there is no minimum number of employees for enforcement, it applies to almost every business whose sales are in excess of $500,000.

Whether or not the FLSA is reasonable can be argued, but the fact is, it is the law and it is being enforced. Last year, the Department of Labor hired 250 additional investigators just to look into whether firms are adhering to this law, and the number of court cases involving FLSA violations is increasing by more than 70 percent each year.

Overtime pay is one of the key areas of focus. So many businesses are not compliant with the FLSA overtime pay mandates, nor do they keep adequate records, which are critical when facing investigation by the Department of Labor. If it is found that you have not paid your employees correctly, you will have to repay the employees in addition to a stiff penalty for not following the law.
A major piece affecting overtime pay is classifying employees as exempt or non-exempt. The Department of Labor has identified specific conditions defining exempt and non-exempt employees. These guidelines are detailed on their website.

If a non-exempt employee works more than 40 hours a week, they must be paid overtime at a rate of at least one and a half times their normal salary. For example, if a non-exempt staff member sits at their desk doing business during lunch, this would be considered time worked. Because of this law, some firms tell their employees that they must leave their desk during lunch to ensure that they are not working.

Even if your business has a policy stating that overtime is not allowed or requires prior approval, you will still have to pay when a non-exempt staff member works more than 40 hours. In addition, the FLSA mandates the employer will still have to pay even if the employee waives their right to be paid for their time.
The most troubling part of this law is the “off the clock” time. Employers must be so careful with this. For example, if you sent e-mails or texts to a non-exempt employee in the evening, this could and would probably be construed as overtime. For this reason, some employers only permit e-mails to non-exempt employees during their normal work hours.

The FLSA, like so many other labor laws, is so complex and expansive. For this reason, it is really so easy to violate it without even realizing. To be absolutely certain your business is in compliance, you really should seek guidance from an HR professional or labor attorney.

Now go out and make sure you are abiding by the labor laws affecting your company.

You can do this.

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