Sometimes, good intentions can backfire. Case in point, two stories that crossed my desk recently. Each one is about a company that probably had the best of intentions, but still ran afoul of wage and hour laws.
Comp Time Isn’t The Same As Overtime Pay
In the first instance, a software sales company in Texas had to pay $43,940 to 31 current and former sales representatives for failure to pay time-and-a-half when the employees worked more than 40 hours a week.
Instead, the company gave the sales reps compensatory time off for each hour of overtime worked.
This doesn’t necessarily sound like a bad thing. I mean, who wouldn’t like more paid time off? The thing is, the Fair Labor Standards Act (FLSA) says if an employee is eligible for overtime, you must pay them time-and-a-half for any hours worked over 40 in a single workweek. Comp time won’t cut it. Not even if you give employees an hour and a half for every hour they work overtime. According to the law, they must be paid for the time.
This is true even if the employees want comp time instead of the pay. The law does not permit employees and employers to “negotiate” any changes to the provisions of the FLSA. If the law says employees must be paid, then the employer has to give them wages. Comp time isn’t pay, so it won’t satisfy the law for overtime-eligible hourly and salaried workers.
But what about exempt employees? In the case of exempt employees, employers aren’t obligated under the law to give them any compensation for overtime in the first place. Since any overtime compensation they get is voluntary on the part of the employer, the organization is allowed to decide what form that “above and beyond” compensation might take: cash, comp time, a box of chocolates, whatever.
Work At Home Is Still Work
In the second example, an Oklahoma business paid $55,965 in overtime back wages to 60 current and former jewelry makers. Apparently, these workers would put in a full day on-site, then continue working at home assembling jewelry “after hours.” They were paid by the piece for the work they did after hours without regard to how many hours it took them.
Now, I’m not sure about the company’s intentions with this, but I can imagine some employees may have liked the idea. Think of it: go home, kick your shoes off, spend time with your family and assemble a couple of pieces of jewelry. Get some dinner going in the oven, assemble another piece or two. After supper, put together a few more while watching NCIS or American Idol. And you get paid for each piece you assemble? Sweet!
The problem is, the employer has an obligation under the law to track employee work time so they can ensure everybody is making at least the minimum wage. It’s OK to pay by the piece, as long as the effective hourly rate doesn’t dip below $7.25 (note the minimum wage may be higher in some states) and employees are paid time-and-a-half if they work more than 40 hours in one workweek.
In this case, the employer didn’t track the time accurately. But if the workers were already putting in full days on-site, it seems likely any time they spent in the evenings assembling jewelry would probably result in overtime. And apparently their per-piece rate wasn’t enough to cover the overtime pay the workers should have received.
In this case, a time tracking solution such as our AcroTime online time clock might have been helpful. Employees could have clocked in and out using their computer and a web browser, a smartphone app or even their land line telephone. The employer could still have generally paid by the piece, but they would have had the time records to determine when someone was due additional overtime pay. This could have saved the company a lot of hassles and money.
The Letter Of The Law Matters
Don’t make the same mistakes these businesses did. Your employees may ask for something creative in lieu of overtime pay. Comp time, the ability to work from home, whatever. In general, though, if they are overtime-eligible, under the law as currently written you must pay them at least time-and-a-half for their overtime. If you want to offer some of these perks as an additional benefit, that’s certainly allowable, but you can’t offer them in lieu of time-and-a-half overtime pay.
What do you think about this? Is it important for the law to stay as-is to preserve employees’ right to fair a fair day’s pay for a fair day’s work? Or is it time for the law to allow some more flexibility in compensating employees for their overtime?