By Steve M. Cohen bio
In the rush of managing an office, it’s easy to overlook significant pitfalls that can cause major problems.
One of these pitfalls is the Fair Labor Standards Act, an area that managers and partners often overlook until they face a problem. I strongly suggest using caution to avoid problems and penalties.
Until a few years ago, the law’s impact was not too dramatic. From 2004 to 2008, a total of only 3,000 FLSA-related cases were handled by the federal Department of Labor. But during just the first six months of 2010, 3,300 FLSA related cases were reported. That increase—and it continues to grow—has a stark meaning for employers and managers.
FLSA has been around for years and there’s no escaping it
The federal Fair Labor Standards Act is not new. It originated in 1938 and involves overtime payment requirements for employers: “straight” time for any work done under 40 hours per week, and time and a half for any hours over 40 hours per week.
There is no opting out of accountability to FLSA. Laws such as the Americans With Disabilities Act (the ADA) do not apply until you have 15 or more employees. The Family Medical Leave Act (FMLA) kicks in at the 50th employee. But FLSA is ever present. Even if you have just one employee, you must comply with the FLSA.
One of its first requirements is that employers classify employee positions using specific criteria. There are exemptions, but this criterion is fixed.
The importance of good record-keeping
Next, employers must maintain accurate time records for all hours worked by all employees. The Department of Labor, in an FLSA dispute, does not require the employee to prove they actually worked the hours that he or she claims. This can put the employer in a lose-lose position.
An employee can claim any wild number he or she wishes without any documentation. The employer can be compelled to pay the employee all of those hours at time and a half unless there are records to dispute the employee’s assertion. No records, or poor records, mean you have no defense for any claim made by an employee.
You may have to pay the employee AND the DOL
The Department of Labor is empowered to levy a fine of up to three times the actual damage to the employee. So, if an employee claims $4,000 in unpaid overtime, and the employer has no records to dispute that, the Department of Labor will compel the employer to pay that $4,000 to the employee and a $12,000 fine back to the Department of Labor. This is how the DOL actually supports itself! A claim of ignorance or mistake on the part of the employer is irrelevant.
Don’t be caught off-guard
The Department of Labor is promoting hotlines encouraging employees to report any concerns that they may have about the employer. That’s why the number of cases has exploded.
My advice is that owners and managers consult with a professional who is well versed in FLSA requirements. It’s especially important to have a procedure in place that absolutely ensures accurate, detailed, and permanent record-keeping of all hours worked by all employees. Like so many things in personnel management, it is a little bother to avoid immense headaches.
