The Fair Labor Standards Act (FLSA) requires that non-exempt employees be paid at least the minimum wage for every hour worked, and that they be paid one and a half times their regular pay rate for all overtime hours. To determine employees’ pay, an employer must know the number of hours they’ve worked. In some cases, time employees spend not actually working must nonetheless be counted as working time; other "working" time can be excluded from hours worked. To avoid wage and hour problems, you must know the difference.

Example:  TRW expected its hourly plant workers to arrive before their shifts started to "properly communicate any issues and the status of the job" to the workers on the prior shift. A written policy signed by a plant manager and posted in the plant stated this was "not a request" and was to be "carried out every day." This pre-shift time was not counted as hours worked; employees were prohibited from clocking in until their shift started.

The company may be liable for millions of dollars of unpaid wages and overtime for an extra 15 minutes per day per worker for over 10 years. (Jobe v. TRW).

TIP: Employers should not ask for any work time they don’t pay for.

Example:  A class action lawsuit on behalf of 1,800 workers claimed the employer regularly pressured (and sometime required) employees to work during their half-hour lunch breaks without paying minimum or overtime wages. The company defended on the basis that employees received free meals or meal allowances.

The company settled for $3.3 million with a federal judge’s approval. (Gerke v. Waterhouse Securities, Inc., N.D.CA, No. C-98-4081, 1999)

TIP: The law requires that at least minimum wage be paid for all work "suffered or permitted" and included in overtime computations when applicable. Even "voluntary" work during lunch must be reflected in non-exempt employee paychecks.

The FLSA does not require employers to allow a certain amount of time each day as lunch breaks or rest periods for non-exempt employees, but does cover whether employers must pay for rest breaks or meal periods. Generally, employers must pay for short rest breaks (usually between five and 20 minutes). Employers don’t have to pay for meal periods of 30 minutes, if one of these tests is met.

• Predominant benefit test. Meal time not spent primarily for the company’s benefit is not work time and does not have to be paid for.
• Primarily engaged in work-related duties test. If employees’ job duties are relatively minor while they are eating (such as a firefighter being on-call during meals at the station), the employees do not have to be paid for that meal time.
• Completely relieved test. If employees are completely free of any work-related tasks during meal breaks, they do not have to be paid for that time. However, employees aren’t "completely relieved" if they must perform any duties, whether active or inactive, while eating. If employees must eat at their workstations, they must be paid, even if they don’t actually work while eating.

If you think these tests are ambiguous, you are right. Courts rule inconsistently on similar facts. Employers should not take the chance that a court will agree with their interpretation. When it’s a close call, pay the wages and avoid the penalties.

Example:  A new payroll clerk failed to differentiate between time records for exempt and non-exempt employee. The employer discovered that exempt employees’ pay had been docked more than $30,000. The company immediately corrected the problem when it was discovered. Two employees sued, claiming the company had a practice of docking pay; thus, all exempts should be reclassified as non-exempt and afforded overtime pay.

The court disagreed. The docking was an honest mistake, not a company practice. (Reeves v. Alliant Techsystems, Inc.)

TIP: The USDOL or the courts may reclassify exempt employees as non-exempt if an employer is in the "practice" of docking exempts’ pay; or if the employer has a policy that creates a "significant likelihood" that such deductions would occur. Employers should audit payroll records to detect errors and take advantage of the FLSA’s "window of correction" in which mistakes can be corrected in a timely manner without penalty.

BEST PRACTICES FOR EMPLOYERS

• Monitor employees’ time and activities carefully. If necessary, allow them to quit their shifts a few minutes early so they can clean up, change, or prepare equipment at their straight-time rates, not their overtime rates.
• Company policy should require employees to leave their workstations for meal breaks. This should be clearly communicated and strictly enforced.
• Unless employees will be paid for their attendance, make after-hours meetings, training, or other company events voluntary.
• Equip "on-call" employees with pagers or cellular phones. Allow maximum freedom as to employees’ use of their on-call time.
• Establish and communicate a strictly enforced policy that employees are not permitted to work before or after normal hours unless authorized in advance in writing. Audit time sheets regularly. Watch for employees who arrive early and leave late: Are they feeling pressured to work overtime? Why can’t they finish their work during normal hours?

For more information on this and other FLSA compliance issues, contact Omer Causey at 941-366-7550.

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