Changes to overtime rules have been in place since 2004 , yet employers are getting tripped up for big-dollar lawsuits with increasing frequency. What’s up with that?
Just a few examples from recent headlines:
• McLand, a wholesale distributor of food and grocery products, pays $1.5 million in overtime to “retail merchandising specialists.”
• Allied Home Mortgage (as if mortgage companies didn’t have enough troubles these days) hit for $1.8 million for not paying overtime premium to commission-only employees.
• Hong Kong Group Inc., a grocery chain, hit with $2 million lawsuit for overtime and minimum wage charges.
• Southern California Maid Service and Carpet Cleaning pays $4.5 million for workers misclassifiedas independent contractors.
• Pilgrim’s Pride Corp., a chicken processor, pays $3 million for overtime violations involving hours worked and donning and doffing time.
Many of these companies are not big giants of industry that can absorb a quick million-dollar judgment. (And these examples ignore the staggering legal fees that have piled up in mounting a defense.)
What’s boosting the number of overtime suits? Some factors that contribute:
–Lawyers are noticing that overtime lawsuits are lucrative and relatively easy to bring.
–The victims are typically lower-level workers to whom juries will be sympathetic.
–Overtime suits are easy for juries to understand (not like sexual harassment, for example, where there is a lot of gray area).
–The fact that many suits lend themselves to class actions makes them even more lucrative.
Overtime–the hidden time bomb. It’s one of the most basic rules in HR–and one of the most frequently flouted. Learn what you need to know to avoid lawsuits and fines at BLR’s upcoming audio conference. Find out more
What Are the Most Common Overtime Problems?
Several types of violations hit the headlines again and again, including:
Failure to pay overtime at all. It’s astounding that companies think that they can get away without paying overtime, but a surprising number try. Memo to management: the employees are going to figure this out, and some of them are going to complain.
Misclassification of independent contractors. There is a substantial gray area here, but it’s worth penetrating it to be sure you are making a rational, supportable decision. If your independent contractors are doing the same work as your employees, they may well be employees.
Misclassification of exempt workers. Here again, there is some gray area in determining exemptions, but the most common offenses are not very technical. For example, you will often see situations in which a person is called a “manager,” but his or her duties are clearly nonexempt (working the cash register, stocking shelves, etc.).
In making exemption determinations, it’s important to remember that title means nothing–all that matters is what the person does.
Failure to pay overtime on bonuses. It’s annoying, but it is required that when you pay bonuses, you go back and recalculate overtime payments to include the bonus.
Overtime–Your best workers may be piling it up unbeknownst to you. If they work it, you owe it. Working through lunch? Probably overtime. Working late off the clock? Probably overtime. Get the latest techniques for avoiding overtime lawsuits–attend BLR’s new overtime audio conference. Find out more
Failure to pay for tasks done before or after work. Donning and doffing–or as the government grandly calls it, “preliminary and postliminary” tasks– such as changing into special outfits, or traveling to the worksite, may need to be paid time.If you are requiring employees to do significant tasks before clocking in or after clocking out, you should reconsider your requirements.
In the next issue of the Advisor — off the clock, travel, and general overtime confusion, as well as the announcement of a new audio conference on avoiding overtime claims.