FLSA Pitfalls and Innocent Errors

Inspired by the presentation given by Astron's own Michael F. Maciekowich, in partnership with Bond, Schoenick, & King, entitled: "Can Your Compensation System Weather the (Hurricane) Winds of Change from the Obama Administration?" this edition of Astronology will tackle some of the pitfalls and innocent errors organization sometimes find themselves in when handling serious issues with the Fair Labor Standards Act, or FLSA.

Overtime Issues

"White Collar Exemptions"

Many organizations are aware that salaried, exempt employees are excused from overtime pay ("Exempt Employee", Dawn Rosenberg McKay) and other wage and labor laws. However, the confusion often lies in determining which employees meet the criteria of exempt or non-exempt. Michael clearly states: "Often employees are classified as exempt based solely upon job title, job classification, bargaining unit membership, or salary. These factors provide a good place to start the FLSA ‘duties' test analysis; they are not legally sufficient in and of themselves, however. An examination of the employee's actual job duties is also required." Well, then, we may ask ourselves....what else do we need to know? A November 2008 article from BLR's HR Daily Advisor breaks it down: "To be exempt under the administrative, professional, or executive exemptions, employees must pass three tests." These tests are as follows:

Salary Level Test: An employee has to make at least $455 per week.

Salary Basis Test: The employee must be paid on a salary or fee basis.

Duties Test: The employee's work falls within the falling types of duties:

o Administration

o Executive

o Professional

o Outside sales

While BLR gives a brief explanation as to what the determining factors are for each of the above mentioned duties, it is best to consult the Department of Labor's website for official documentation. It may also be wise to consult a labor lawyer. A small fee for prevention can save an organization a lot of time and money in the future.

"Alternative Work Schedule and Overtime"

Another tricky subject involving the FLSA law human resource professionals everywhere should be aware of is dealing with overtime for employees under a compressed work schedule (CWS) or a flexible work schedule (FWS). The U.S. Office of Personnel Management (OPM) explains: "For a full-time employee under a CWS program who is exempt from the FLSA, overtime hours are all officially ordered and approved hours of work in excess of the compressed work schedule. For a full-time employee who is covered by the FLSA (non-exempt), overtime hours also include any hours worked outside the compressed work schedule that are "suffered or permitted." For a part-time employee, overtime hours are hours in excess of the compressed work schedule for a day (but must be more than 8 hours) or for a week (but must be more than 40 hours)."

For an employee under a flexible work schedule other circumstances must be considered. For starters, hours worked over 8 in a day, or 40 in a week, is considered overtime for FWS workers. However, if this additional time were "suffered or permitted" hours, the employee cannot take overtime compensation. Be sure to inquire with a labor lawyer for full details in regards to determining whether a FWS employee has acquired overtime. "Compensation Time Off (CTO)"

Another hurdle many human resource professionals tend to trip over is the discussion between Compensation Time Off (CTO) and Overtime Pay (OP). Compensation Time off, as the OPM describes, is, "Time off with pay in lieu of overtime pay for irregular or occasional overtime work." Mix-ups begin when employers decide to give employees CTO without understanding who qualifies for it. For starters, some are not aware that the "FLSA mandates that non-exempt employees must be paid in dollars for their overtime and cannot receive compensatory time instead." US Legal, Inc further informs: "In 1978, Congress passed the Federal Employees Flexible and Compressed Work Schedules Act which enabled the Federal Government to pay its employees comp time instead of overtime pay. In 1985, this provision was extended to state and local employees as well at the employee's option." Regardless, FLSA still requires that overtime compensation to be made monetarily to private sector hourly workers.

For public sector employers, further confusion can occur when human resource representatives do not distribute the CTO time properly. If an employee where to work over 5 hours overtime, in compensation time then should expect 7 ½ hours off. Just as with overtime, employees who receive CTO should expect the time back in 1.5 times the amount worked (according to an article at vault.com). They should also expect to take those hours off the same week they accrue them. Many employers do not keep these points in mind and compensate their workers with exact hour time off or allow them to accrue the hours for weeks, and months at a time.

Innocent Errors:

"Forgetting to Keep a Paper Trail"

Michael mentions in his presentation, "The biggest mistake employers of all sizes make is to over-rely on time cards or time sheets to record hours for their non-exempt employees. More commonly, employers get tripped up because they lack a system for recording ‘borderline' work time spent by non-exempt employees. The errors need not be intentional to violate FLSA." For many employers it is very difficult to keep track of every single minute of time worked by their non-exempt employees. Not all companies can afford an electronic sign in/sign out device to accurately keep track of time. However, all companies can afford to document hours via record sheets that are transferred onto a database. Investing into a simple database program such as Microsoft Access could help any organization to accurately keep track of all time worked.

"Outdated Job Descriptions"

Due to understaffing, some employees may take on tasks usually left to other employees in another job title. While circumstances may permit this, HR representatives should recognize that due to the extra work these employees undertake their exemption status may be affected. Also keep in mind that not all salaried employees are exempt. HR representatives must determine if 20% or more of the employee's day is spent on non-exempt tasks, and whether at least 50% of the day is still spent on primary job duties. If adjustments are needed, so be it. First, start with a thorough audit of the organization's job descriptions. After receiving an accurate understanding of what employees should be doing, physically take the time to find out what they are actually doing. Employees may appreciate that you are taking the time to find out whether they are being overworked or not. After gathering this data compare and contrast. If you notice that employees should have been paid overtime, or have compensatory time off, take care of it immediately. It is more than likely cheaper than a lawsuit. Also, do not forget to also check with state laws. Although the FLSA is a federal law, if your state has a law more favorable to employees, then that law applies more than the FLSA does.

"What To Do? OH! What To Do?!"

With all this talk on the FLSA and how easy it is to make a mistake in applying it, many have become frustrated. Even though it is understood that the FLSA was not put into place to make the topic of compensation more difficult than it already is, many organizations still find themselves between a rock and a hard place. While consulting a labor lawyer is always the best way for clarification, organizations don't always have the funds or the time to consult for every questionable issue. Many human resource consulting firms, like Astron Solutions, offer FLSA compliance audits separate from or part of consulting engagements. In addition we at Astron Solutions are happy to give Astronology readers a peek into an upcoming product. Astron Solutions is currently in the works of creating a training module that will help educate managers on the ins and outs of the FLSA law. To find out more, just check Astron Solutions' website for information at a later date. It is also not a bad idea to confer with the Department of Labor website and the Office of Personnel Management website for more information. In addition, the DOL provides a free Power Point review of FLSA basics. Taking the time to be informed from both these sources will be beneficial. In addition, with assistance through training modules and trained professionals, all can avoid the common pitfalls and mistakes in handling the FLSA.


Astron Solutions gets our articles from our bi-weekly e-zine, Astronology. Astronology utilizes a number of authors, each with their own fields of interest and expertise. All authors are employees of Astron Solutions unless otherwise noted. If you'd like to sign up for your FREE bi-weekly edition of Astronology, please visit http://visitor.constantcontact.com/email.jsp?m=1101600060994 and fill out the required information. A bit about Astron Solutions: Astron Solutions is a New York-based ...

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