HR Management & Compliance

A Holiday Wage and Hour Checklist: Are You Naughty or Nice?

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By Jeff Gilbreth and Gauri Patil
As the holiday season ramps up, many of us will be spending time with family and friends, attending holiday parties and preparing for another new year. While this is certainly a fun and joyous time, we are here to remind employers that various wage and hour pitfalls are lurking and could snare an unwary employer this holiday season.

For many employers, the holiday season is the busiest time of year. For some it means the end of the fiscal and/or tax year and the accompanying rush to collect revenue and submit mandatory filings. For other employers, specifically those in the retail and hospitality sectors, it is a critical time during which the bulk of the year’s revenue hopefully will be earned. Regardless of the industry, many employers often find themselves during the holiday season with more work to be done and dwindling time to complete it. Some employers will hire temporary, seasonal employees to help manage the work crunch, while others will ask their existing workforce to put in more hours. Regardless of how an employer handles the increased workload, it must be cognizant of the associated wage and hour risks.

Accordingly, if you hire additional workers this holiday season and/or ask your current employees to put in longer hours, we urge you to keep in mind the following checklist of wage-hour issues to help ensure you do not violate applicable laws:

Employee vs. independent contractor: Be careful not to fall into the trap of thinking seasonal hires can be classified as independent contractors (and not employees) simply because their employment is for a short, finite period. Regardless of the planned duration of their relationship with the company, if a worker does not satisfy the criteria to be classified properly as an independent contractor, the employer that misclassified the worker will be exposed to significant potential liability

Overtime: Generally, non-exempt employees who work more than 40 hours in a workweek will be entitled to overtime pay. During the holiday season, employees who normally do not work overtime may begin regularly working overtime due to the increased workflow. Employers must be cognizant of how many hours their overtime-eligible employees are working and ensure that they are calculating the employee’s overtime rates appropriately. Please also remember that some states require overtime pay for employees who work more than a certain number of hours per day.

Holiday bonuses: Many employers pay holiday bonuses to their employees to thank them for their contributions to the company over the course of the year. What many employers do not realize is that annual/holiday bonuses paid to non-exempt employees can, if certain requirements are not met, have the effect of increasing the employees’ overtime rates over the time period to which the bonus relates. Employers should be certain that they either: (i) structure their bonus programs so that nonexempt employees’ overtime rates are not affected by the payment of a bonus, or (ii) properly recalculate the overtime rates.

Time cards: Employers who extend their usual operating hours during the holiday season should make sure that employee time cards reflect all hours worked and correspond with the holiday hours. Otherwise, an inaccurate time card may result in employees not receiving wages for all hours worked (including overtime). This is exactly what happened in Brown v. Family Dollar Stores of Ind., LP, 534 F.3d 593 (7th Cir. 2008). In Brown, the employee had sole authority to open and close the employer’s store. During holiday season, the store had extended hours and, therefore, the employee closed the store at a later time, meaning she worked longer hours than usual. The employee’s time cards, however, neither reflected the additional time she worked nor corresponded with the store’s extended hours. The court ruled that the inaccurate time cards cast doubt on the accuracy and adequacy of the employer’s records and created a genuine issue of fact as to whether the employee had been properly paid overtime. Inaccurate time cards may be of particular concern for employers who still maintain a time card system that automatically “clocks out” employees at specific, predetermined times. While this is generally not a good practice at any time, it is particularly dangerous during the holiday season when employees may work longer hours. Any employer using an automatic time card system should ensure that the system reflects any change, even if temporary, in an employee’s work time.

Meal and rest breaks: States vary regarding their respective meal and rest break requirements, but generally require employers to provide employees with breaks after they work a certain number of hours. As employees work longer hours during the holiday season, they may qualify for new or additional breaks.

Days of rest: Some states maintain laws prohibiting employers from requiring that employees work seven consecutive days. Employers should keep these statutes in mind as they set work schedules and ask employees to work more during the upcoming holiday season.

This piece was republished by permission. Attorneys Jeff Gilbreth and Gauri Patil are associates at Nixon Peabody in Boston where they concentrate their practice in the areas of labor and employment litigation and counseling.

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