The Fair Labor Standards Act (FLSA) is a federal employment statute that was enacted in the 1930s. Although it is one of the nation’s older employment statutes, it continues to present challenges to employers who often misapply the provisions within the statute.
At its most basic level, the FLSA requires that non-exempt employees receive at least the federal minimum wage for all hours worked, and that they receive overtime at 1.5 times their regular rate of pay for all hours worked over 40 in a work week. While this sounds simple enough, application of these requirements has proven to be difficult for employers.
FLSA litigation has steadily risen in the last two decades, and 2012 saw a record number of FLSA lawsuits filed in the federal courts. Put simply, the potential for costly FLSA litigation has never been greater. Accordingly, there is great incentive for employers to avoid common FLSA mistakes. These include misclassifying an employee as exempt, and calculating overtime pay incorrectly.
Misclassifying an employee as exempt
One mistake that employers often make is classifying an employee as exempt under the FLSA when the facts of employment do not support any exemption. When it comes to determining an employee’s exempt or non-exempt status, job labels and descriptions are irrelevant. Instead, it is the employee’s actual job duties that matter.
Many employers assume that if an employee’s job requires performance of duties that are of great significance to the business, the employee is exempt under the “administrative” exemption. However, the relevant part of the test for that exemption is whether the employee exercises discretion and judgment regarding matters of significance. In other words, if the employee has no discretion in the performance of his or her job duties, regardless of whether the duties involve matters of significance, the exemption does not apply.
In the field of dentistry, it is often unclear whether a dental hygienistis exempt under the statute. Many employers assume, without analysis, that hygienists are exempt under the FLSA’s “professional” exemption. However, under the federal regulations, only those hygienists who have completed four academic years of study in an accredited school approved by the American Dental Association potentially qualify for the exemption. Of course, as with any of the so-called “white collar exemptions,” the hygienist would also have to be paid on a salary basis and receive at least $455 per week for the exemption to apply.
Calculating overtime payincorrectly
Another common mistake is the (mis)calculation of overtime pay for non-exempt employees. The FLSA does not require that non-exempt employees be paid on an hourly basis, however, many are paid hourly. Employers often wrongly assume that overtime hours must be paid at a rate that is 1.5 times the employee’s hourly rate. However, the overtime rate actually must be paid 1.5 times their regular rate, which includes “all remuneration for employment,” including commissions, incentive pay, and most bonuses. When calculating overtime pay, employers must be careful not to omit any “remuneration” included in that calculation.
These are just two of the many common FLSA mistakes made by employers. Audit your wage-hour practices and look for these mistakes in order to minimize your business’ risk of becoming the latest target of an FLSA lawsuit.
Ted Boehm is a labor and employment attorney for Fisher & Phillips, LLP in Atlanta. He counsels employers on a variety of employment-related matters, and can be reached at [email protected] or 404-231-1400.