Complying with overtime requirements should be relatively “simple” for employers, yet often these requirements cause confusion for the business community or are, perhaps, disregarded. The FLSA requires that covered, nonexempt employees be paid (at least) the federal minimum wage of $7.25 per hour, and one and one-half times their regular rate for hours worked over 40 per week. Just this past year, the U.S. Department of Labor’s Wage and Hour Division investigated numerous New Jersey employers. It obtained a consent judgment to recover $3 million in back wages and $91,000 Civil Money Penalties from a New Jersey employer found to be in violation of the FLSA!
Not only were the employees working up to 84 hours per week without receiving earned overtime pay. Many of the employees were paid partly “off the books,” and sometimes in cash, to disguise the improper payment of overtime. As such, the employer failed to maintain accurate records of the hours employees worked. This second aspect, failing to maintain accurate records of hours worked, led to a consent judgment between the Labor Department and the employer consisting of a three-year monitoring program including the installation of biometric time clocks in each establishment; a notice to workers regarding the terms of the compliance agreement; FLSA training for all employees in English and other languages; an anti-kickback protection clause to ensure that all workers are paid any back wages due; and a toll-free telephone number for workers to report violations to the monitor.
Failure to follow-up overtime regulations can lead to not only a large judgment of back-pay, but civil penalties as well. Overtime calculations can also become complicated when an employer gives bonuses, since absent an exception, they must be included in the regular rate of pay. The calculation in itself is quite complicated. The proper computation has been addressed in an earlier post and it remains an issue of concern for employers as simply “knowing” that overtime is due is only half the answer. The other half (perhaps even more important) is the proper computation of that overtime.
The lesson for employers is to be quite cognizant of the overriding obligation to properly pay overtime, to know what employees are entitled to overtime and to know its proper computation. These questions are often easier posed than answered, but an internal audit of the employer’s compensation practices is a sure fire way to answer those questions correctly.