Wage and Hour Laws

Wage and Hour Laws
by Frank L. Kollman

In 1938, Congress passed the Fair Labor Standards Act, establishing a minimum wage and a forty-hour workweek as the legal basis for overtime. While the concepts of overtime and minimum wage seem simple, the FLSA is perhaps the most complex labor law in the land. I guarantee that your Company, no matter how sophisticated and careful, is violating the Fair Labor Standards Act in some way.

In July 1999, a large securities firm agreed to pay more than three million dollars to its discount brokers (including former employees) who regularly worked through their lunch hours. Certainly a large company such as this should have known that nonexempt employees must be given at least a 30 minute non-interrupted lunch hour if the company does not want to pay them for the time.

Earlier in the year, a client called me to discuss the wage and hour implications of Maryland's regulation effectively prohibiting smoking indoors. This client was allowing employees who needed a nicotine fix to take 10 minute spoke breaks, outside, two times a day. He wanted to know if he should have them punch out so he would not have to pay them. He was absolutely flabbergasted when I told him that because the breaks were less than 30 minutes, he had to pay the employees whether they punched out or not. Then again, he did not have to give them breaks at all. I never found out if he discontinued the smoke breaks or decided to dock the employees despite my legally-sound advice.

The two biggest areas of contention in the wage and hour arena involve (1) hours worked and (2) exemptions. With respect to the hours-worked issue, employees must be paid for such things as:

Interrupted lunch hours.
Time worked both before and after a shift.
Time worked at home.
Time spent laundering uniforms.
Travel (though not usually commuting time).
Training.
On-call time, except under certain circumstances.

Ironically, an employer can fire an employee for punching in early or punching out late, but he cannot refuse to pay the employee if work was performed.

As to the exemptions from overtime and minimum wage, there are regulations of the Department of Labor that are just as complex as the Internal Revenue Code. First, the exemptions vary as to their coverage: some employees are exempt from minimum wage and overtime, some only overtime. Second, there are various tests that employees have to meet to be exempt. Third, exempt employees can lose the exemption, either temporarily or permanently, depending how they are actually compensated. Fourth, the exemptions are based on what the employee does, not how much he or she is paid.

One thing about exemptions is relatively clear: hourly employees are rarely, if ever, exempt. Exemptions are for salaried employees. As one might imagine, salary issues arise all the time:

Can I dock a salaried employee without losing the exemption? Can I dock a salaried employee without losing the exemption?
Where do commissions come in?
How much must the salary be?

Hourly employees making 200 thousand dollars a year may be entitled to overtime while salaried employees making 50 thousand are not.

Employers are well advised to stay on top of the wage and hour laws for a variety of reasons. Employees and former employees can sue for back pay up to three years, an equal amount in liquidated damages, and attorneys' fees. Further, employees cannot agree to accept less than the amount to which they are entitled under the Fair Labor Standards Act, even if the wage arrangement was the employee's idea. And employees cannot settle wage and hour claims for less than the amount they are entitled to receive, even if they settled with the advice of an attorney. In other words, an employer can settle a wage and hour case, then be sued again because the settlement amount was insufficient.

Employers would be prudent to have their wage payment practices reviewed periodically to insure compliance with the FLSA. The cost to the company of a Department of Labor audit or an FLSA lawsuit can be devastating.

Kollman & Saucier, P.A., The Business Law Building, 1823 York Road, Timonium, MD 21093 Phone: 410-727-4300
Fax: 410-727-4391 © 1999 - 2010 Kollman & Saucier, P.A. All rights reserved.
Website maintained by Armistead Technologies, Llc.^tm

Wage and Hour Laws by Frank L. Kollman

Wage and Hour Laws
by Frank L. Kollman