National Clothesline

A federal appeals court in Illinois has awarded an employee overtime pay for hours spent getting stress counseling and commuting to the counseling sessions.

The employee was properly ordered by the employer to undergo stress therapy to keep her job, but the court ruled that because the therapy was for the benefit of the employer, it was compensable work time.

Ironically, the employer could have fired the employee for the incident that caused the employer to make her seek treatment. Instead, because the employer tried to give the employee another chance, it ended up having to pay extra compensation.

This case illustrates, again, the need for employers to be mindful of the Fair Labor Standards Act. This law, which is nearly 70 years old, is still one of the most misunderstood labor enactments, and consequently the most violated.

As I have said in this column countless times, the Fair Labor Standards Act is not “intuitive.” Logic and common sense are not necessarily good indicators of what the law is.

For example, an employee who messes up an order for a customer, but stays after hours to fix it up to keep from losing his job, must be paid for the time spent correcting his mistake.

Firing the employee would have been fine, but failing to pay the employee for doing the extra work his incompetence caused is not. In other words, the lesser penalty is against the law.

Under the Fair Labor Standards Act, employees may not agree to receive less than the law requires, even if the arrangement was their idea.

There was a case many years ago where the employees came to their boss and asked to work overtime at straight pay to accumulate hours to be used later during hunting season.

As a result of a Department of Labor audit, the employer was ordered to pay those employees time and a half – in cash – for those overtime hours.

While certain employees may be exempt from overtime and minimum wage under the FLSA, failure to meet all the requirements of the exemption can result in liability for overtime and minimum wage in the form of back pay.

These requirements are frequently complex and difficult to apply. Docking an exempt employee for chronic lateness could result in the loss of the exemption, even though firing the employee would be perfectly proper.

At this point, I should add that trying to make individuals independent contractors is not a good way to avoid liability under the FLSA. First, true independent contractor status is hard to prove unless the individual is employed by another company, or clearly self-employed and working for other companies as well as yours.

Second, there can be tax issues arising out of the incorrect designation of an employee as an independent contractor. Employers do not want to deal with the IRS as well as the Department of Labor.

Getting back to the Illinois case, the Department of Labor has taken the position that any time an employee spends for the benefit of the employer is compensable, as long as the employer has ordered the employee to spend that time doing the activity.

Further, the activity benefits the employer if it makes the employee a fitter employee. If the activity is work, however, it doesn’t matter if the employer ordered the employee to do it. If the employer “permits” the employee to work, it is compensable time.

The lesson is that if an employee deserves discipline, it is less costly to suspend or fire her than to order her to get counseling. So much for a second chance.