It is common for a small or mid-sized business to be blindsided by a lawsuit seeking overtime pay, brought by a worker the business believed was either: a) not their employee, or b) exempt from overtime pay. For the reasons discussed below (clue: saving money), it’s advisable to figure out now, before you get served with such a lawsuit, which of your employees is subject to the Fair Labor Standards Act (“FLSA”)’s overtime pay requirements.
You probably already know that the FLSA requires employers to pay hourly employees one and a half times their regular rate of pay for each hour worked over 40 in a week. What you may not know is that salaried employees, absent some exemption, also must be paid time and a half for hours over 40, and the employer is responsible for keeping records sufficient to determine the amount of compensation due. For example, salaried administrative assistants have been awarded unpaid overtime. You also might mistakenly believe that an employer is not responsible for paying overtime compensation to anyone who has signed an independent contractor agreement or is paid via a 1099 rather than W2: not always the case! Many federal decisions have found that self-labeled “independent contractors” were not, in fact independent, and therefore were owed back pay for failure to pay overtime compensation. There are even decisions finding general contractors responsible for paying underpaid wages to the employees of their sub-contractors!
If a worker is paid less than he is entitled to, the worker may either make a report to the Department of Labor (who will contact the Employer) or file a direct action. The claim can go back as far as three years. The worker is owed DOUBLE whatever they were unpaid, plus attorney fees! In many cases, the attorney fees exceed the amount of wages the worker contends are underpaid.
For the reasons above, any employer that is currently asking its workers (whether they are hourly, salaried, or even “contractors”) to work more than 40 hours in a week without paying overtime should consult an employment lawyer to verify that these positions are, in fact exempt from FLSA overtime requirements. Additionally, if it is determined, through a self-audit, that wages were underpaid, an employment lawyer can advise how to correct this mistake and avoid the risk and costs of future litigation.
About the Author: I am an associate attorney with Briskin, Cross, and Sanford, LLC. I focus my practice on representing small to mid-sized businesses, as well as executive employees. I have experience Defending FLSA claims, as well as drafting contractor agreements that minimize the risk of a finding of FLSA employment. If you are interested in a free consultation as to whether I can help your business analyze its current FLSA overtime risk, I can be reached at 770-410-1555 or [email protected]