ABC Taxes, Tips & Tools

In this time of high unem­ploy­ment and lay­off, employ­ers are expect­ing employ­ees to do more in the same amount of time.  In this envi­ron­ment it is pos­si­ble for employ­ers to run afoul of the Fair Labor Stan­dards Act (FLSA), which dic­tates over­time pay for non-exempt employees.

Num­ber of Hours Worked:  Once an employer deter­mines a worker is non-exempt then an employer must be vig­i­lant about the hours an employee works.  FLSA over­time kicks in after an employee works 40 hours dur­ing a work­week of 7 con­sec­u­tive days.  The work­week must be fixed and employer may not move the days around just to make the 40 hour work week fit, nor may the employer aver­age time, or offer com­pen­satory time in lieu of pay to avoid pay­ing the over-time hours.  FLSA is based on hours actu­ally worked, and does not include hol­i­day time or sick time, although an employer’s own poli­cies may over­ride this rule.

There are excep­tions to the 40-hour work week rule, how­ever most non-exempt employ­ees are 40-hour work-week employees:

• Med­ical care providers
• Gov­ern­ment police offi­cers, fire fight­ers, and (some) EMS employees.

For these employ­ees, the FLSA per­mits (but does not require) alter­na­tives to the stan­dard 40 hour per work week FLSA over­time threshold.

Over­time pay must be based on employee’s actual rate of pay. Over­time must be cal­cu­lated on the employee’s reg­u­lar rate of pay which must include a shift dif­fer­en­tial, longevity pay, or other bonus for which the employee is reg­u­larly compensated.

Work-time: Any­time an employee is required to be at the employ­ers premises is work time, even if the employee is on break, or read­ing a novel wait­ing for the employ­ers phone to ring.

Off-the-clock hours: Another area of con­cern for an employer must be the hours actu­ally worked as many employ­ees report work­ing through lunch or dur­ing other off-the-clock hours due to self imposed pres­sure, goals such as meet­ing project dead­lines and super­vi­sory pres­sure. If an employer knows or should have known an employee was work­ing these off-the-clock hours, then these poten­tial work hours may be eli­gi­ble for over­time pay-and fail­ure to pay them can lead to a lawsuit.

Even if an employer’s pol­icy requires a supervisor’s per­mis­sion to work over­time, it is not enough to just say so; the employer must enforce this over­time pol­icy. An employer may not pun­ish vio­la­tors by refus­ing to pay them for the extra hours, but the employer can dis­ci­pline them for such insub­or­di­na­tion in other ways—up to ter­mi­na­tion.  Law­suits over off-the-clock hours are spik­ing in this reces­sion even as tech­nol­ogy increases the num­ber of ways an employee can be work­ing to their employer’s ben­e­fit even when they are away from their desks: Cell phones, wire­less inter­net, and black­ber­ries have expanded the ways an employer can reach out to work­ers even when they are off the employer’s premises.

Other areas where off-the-clock work-time can occur.

• Pre-shift roll call.
• Time spent set­ting up equip­ment before the offi­cial work can start.
• Time spent dress­ing in a cer­tain kinds of gear before work can start.
• Time spent clean­ing equip­ment after the close.
• Post-shift work time could also include time spent by an employee per­form­ing job-related activ­i­ties “on the way home.” e.g. a sec­re­tary who drops off the day’s mail at the post office or deliv­ers some paper­work to a cus­tomer or supplier.
• Employ­ees that take work home.
• An employee con­tacted at home by tele­phone for work related reasons
• If an employee is “called back” to work

Meal time, e.g. lunch breaks:  The employee must truly be free of work dur­ing a non-paid lunch break.  If the employee is at their sta­tion wolf­ing down a sand­wich mon­i­tor­ing the phones or some other work-related activ­ity, then they are work­ing and should be paid for that time.  If an employer requires an employee to be at their sta­tion, the employer should pay the employee for that time and include it as part of their reg­u­lar work day, i.e. instead of arbi­trar­ily deduct­ing an hour from a from a 8 AM-5 PM 8-hour shift, make the shift 9 AM –5 PM instead.  Oth­er­wise, the employee must be com­pletely unen­cum­bered of work related activ­i­ties dur­ing an unpaid meal break and the employer must enforce their no-work-off-the-clock-policy vigorously.

Travel-time:  Gen­er­ally the com­mute to and from work is not con­sid­ered work-time even if the employee has a longer than usual com­mute, com­mutes from a dif­fer­ent loca­tion, or even if the employee is dri­ving an employer’s vehi­cle as long as the employee is not doing work for the employer dur­ing the com­mute. If the employee is writ­ing a report for the employer dur­ing the com­mute, then the com­mute is work time.  Time travel dur­ing work hours is usu­ally con­sid­ered work time-once an employee hits a work-site all time spent trav­el­ing while on-the-clock is work time.  E.g. an employee trav­els from home to a site to pick up tools and then to the employer’s premises-when the employee arrives at the site where they pick up tools they are on the clock.

Train­ing time: Train­ing time required by the employer or which occurs dur­ing the employ­ees reg­u­lar shift is usu­ally work time.  Train­ing time that occurs after nor­mal shift hours AND is truly vol­un­tary (the employer will not penal­ize the employee in any way) AND which is not required by the employee’s job or does not enhance their skills at their cur­rent job (such as train­ing that makes them eli­gi­ble for a dif­fer­ent job) AND dur­ing a time in which the employee per­forms no other work for the employer is not work-time.

Salaried Work­ers:  Just because a worker receives a salary does not mean they are exempt from FLSA.  Read my other blog about what dis­tin­guishes a salaried exempt employee from a non-exempt salaried employee.

Com­put­ing Salaried Work­ers Over­time can be tricky: Over­time for salaried non-exempt employ­ees is based on their hourly rate for a nor­mal work-week.  If a worker is nor­mally paid a salary of $300 for a nor­mal 30-hour work– week then works 40 hours one week, they are enti­tled to an addi­tional 10 hours of pay at their reg­u­lar “rate of pay” of $10 an hour, but not over­time as their pay has not exceeded FLSAs 40 hour work-week.  On the other hand, if a salaried non-exempt employee is paid $400 for a nor­mal 50-hour work-week, then their rate of pay is $8/hour.  If they work 50 hours then they are only enti­tled to $4 more per hour for hours 41–50 or $440.  If a salaried non-exempt worker has a fluc­tu­at­ing sched­ule then their over­time pay may be cal­cu­lated dif­fer­ently every week, how­ever pay­ment under this method is rare-many employ­ers set­tle on a 40-hour per week base pay and com­pute their over­time from that rate of pay.

If you need help with this issue or other small busi­ness ser­vices, small busi­ness ser­vices and tax­a­tion are our busi­ness. Please give Art & Busi­ness Con­sult­ing a call. We would love to engage you as a client.

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