National Clothesline

Yesterday, I saw my first television commercial by a law firm offering to represent employees with wage and hour claims. It sent chills up and down my spine.

For years, I have been giving seminars on wage and hour matters (minimum wage and overtime compensation), and I have yet to find a single employer who does not have at least one questionable compensation practice.

Even scarier is finding employees in the seminar who, for one reason or another, express concern that they are not being paid properly by their employer.

Wage and hour cases are among the worse cases to litigate. First, these cases cannot be settled for less than the employee is entitled to receive, and unless the settlement was supervised by the Department of Labor or a court, an employer can be sued again for the difference.

Second, employees may claim double damages and attorneys’ fees. In some cases, attorneys’ fees exceed the wage claim.

Third, these cases always have a ripple effect throughout the company. The settlement of a claim frequently results in the employer having to compensate other employees who did not sue.

How does an employer avoid problems under the wage and hour laws? The answer is to regularly review your wage and hour practices to insure you are paying employees for all hours worked, including overtime, and properly designating certain employees as exempt.

With regard to exempt employees, you must also make sure that you are not violating the salary rules, which could cause an otherwise valid exemption to be lost.

With respect to hours worked, for example, employees must be compensated for breaks of less than 30 minutes, whether they clock out or not.

Employees who start before their scheduled starting time (or work late) may be entitled to additional compensation.

Employees who eat meals while answering phones or performing other tasks are supposed to be paid for that meal period.

In other words, there are many practices engaged in by employers that would not withstand the scrutiny of a Department of Labor audit.

Many employers think that paying an employee a salary automatically makes that employee exempt from overtime.

Nothing could be farther from the truth. Unless the employee’s duties qualify him or her as exempt, the payment of a salary is meaningless. The Department of Labor or a court can easily turn the salary into an hourly rate to determine how much overtime, liquidated damages, and attorneys’ fees you owe.

On the other hand, most of the exemptions from overtime require you to pay those exempt employees a salary, which is not subject to adjustment except in limited circumstances. That means that docking an exempt employee’s salary could result in the loss of the exemption.

Unless you are confident the deduction is permitted under the wage and hour laws, you should not make the deduction at all.

But what if it’s the employee’s idea to pay him or her a certain way? What if the employees vote unanimously to change their compensation program to, for example, get additional time off around the holidays?

The answer, unfortunately, is that employees cannot agree to take less than they are entitled to receive under the wage and hour laws, even if they receive some sort of benefit. Under the Fair Labor Standards Act, “all” the benefits must go to the employees.

Take a few minutes to think about your wage and hour practices. If you don’t, you may find your employees calling that toll free number I saw in that plaintiff’s lawyers’ commercial.