Finance News & Insights

FLSA: 5 ways well-meaning managers are costing employers a fortune

 

Even if they do have the best intentions, well-meaning managers are often the source of companies’ wage-and-hour nightmares. 

After all, when pay laws are broken, courts aren’t too worried about the intent of the offender. That’s why it’s so critical to train managers on the honest mistakes their peers often make regarding wage-and-hour issues.

To help, Kevin Young and Kara Goodwin of the law firm Seyfarth Shaw LLP have highlighted the top FLSA errors well-meaning managers make. Here are five of our favorites:

1. Team-specific bonuses

Managers are supposed to motivate their employees, but when they incentivize the process without being aware of all the FLSA implications, it can cause major problems.

Example: A manager offers a $100 dollar bonus to any sales reps who can hit X-sales in the month. For one thing, when incentives are non-discretionary, they must be included in the “regular rate” of pay – the rate in which overtime pay is based.

In their excitement to motivate, managers often forget this crucial detail. Another problem arises when employees do after-hours work to hit a goal That time must paid and could lead to unintended overtime.

To avoid this, managers must make sure any incentives:

  • are factored into the overtime calculation when necessary, and
  • aren’t a relaxation of sound time-clock policies such as no off-the-clock work.

2. Mid-break favors

Here’s a common scenario: An employee is taking lunch, and a supervisor says, “you have a minute to me? You can tack on the time to your break after we’re done.”

While this seems innocent enough, if the break if unpaid, such a request runs afoul of the FLSA because under that law unpaid meal breaks are required to be “uninterrupted” and “contiguous.” If the manager wanted to avoid FLSA when asking for help, they would have to allow the employee to take their full break after the task or make sure the entire break that was interrupted was paid.

3. ‘Mandatory’ social attendance

Even fun events can turn into legal traps when managers aren’t careful. Example: A team party. If nonexempt employees are required to attendsocial gatherings during the workday – even if those events take place after hours – that time generally must be paid.

When managers say something like, “you can work through the event, but I’d prefer to see you there,” courts may find that attendance wasn’t completely voluntary and the employee/employees must be paid.

4. Not signing off time worked

Many companies require employees to get to manager approval before working OT – and that’s fine.

Problems occur when managers trying to make a point about company policy fail to pay (or sign off on) overtime an employee worked without getting supervisor approval. While it’s generally OK to discipline employees for not following preapproval policies, once the overtime is worked, employers must pay for that time.

5. Take-the-day offers

Sometimes a nonexempt employee will come in to work and mention something about their personal life (son drops by for an unexpected visit from college, etc.) that prompts a caring manager to say: “Why don’t you just take the day?”

The problem with this act of kindness is a growing number of states now require employers to pay for “show up” or “reporting time.” This covers the minimum pay (e.g., 3-4 hours at the minimum wage) employees must be paid after reporting to work and being sent home.

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