Probably the most common area of wage violations by employers, however, involves the overtime wage provisions of the FLSA. Under the FLSA, all employers engaged in commerce or in the production of goods for commerce shall pay all non-exempt employees for each hour worked in excess of forty hours in a workweek at a rate not less than one and one-half times the employee's regular hourly rate. 29 U.S.C. § 207(a)(1).

There are numerous exceptions to this requirement though. For example, in a retail or service establishment, an employer is not in violation of the FLSA if the employee's regular rate of pay exceeds one and one half times the applicable minimum wage and more than half the employee's compensation (for a representative period of at least one month) is from commissions.

Additionally, some employees fall outside the scope of the FLSA because they are considered "exempt."

• employees in executive, administrative, and professional (including teachers and academic administrative personnel in elementary and secondary schools), outside sales employees, and employees in certain computer-related occupations;
• employees of certain seasonal amusement or recreational establishments, employees of certain small newspapers, seamen employed on foreign vessels, employees engaged in fishing operations, and employees engaged in newspaper delivery
• Farm workers employed on small farms;
• Casual babysitters and persons employed as companions to the elderly or infirm.

Some state wage laws, however, may not recognize or permit the application of some exemptions, and since an employer must comply with the most stringent of the state or federal provisions, it is highly recommended that you review the state law applicable to an exemption that corresponds to your job classification.

Are Your Employees Legitimately Exempt?

In the business industry, one of the most prominent alternatives for compliance with the FLSA's overtime provisions is classifying individuals as "salaried exempt personnel." If done properly, the employer may designate specific individuals as exempt or non-exempt under the executive, administrative and professional employee exemption. See 29 U.S.C.A. § 213(a)(1). In order to be considered "salaried," employees must receive their full salary for any workweek in which they perform any work without regard to the number of days or hours worked. Further, an exempt employee must meet certain tests regarding job duties and responsibilities and should be compensated on a salaried basis at not less than the amounts specified in the FLSA. As a side note, the Secretary of Labor has established both a long and short test for each exemption.

For example, to qualify as an exempt "executive" employee:

• The individual must receive a minimum salary of $155 per week to satisfy the long test, or $250 per week to satisfy the short test;
• The individual must manage two or more full-time employees;
• The individual must have the authority to hire and fire employees;
• The individual must have management as his or her primary duty;
• The individual must regularly use discretionary powers; and,
• The individual must not devote more than 20% of his or her time to non-management activities (40% in retail and service establishments).

Some of the managerial duties qualifying an employee as exempt include the authority to:

• interview, select and train employees;
• set and adjust rates of pay and hours of work;
• direct employees' work;
• evaluate an employee's productivity and efficiency and to recommend promotions;
• handle employee complaints and discipline employees when necessary; and,
• provide for the safety of employees and their property.

See 29 C.F.R. § 541.102(b).

Some employers attempt to circumvent paying their employees overtime wages simply by classifying nonexempt employees as exempt and by giving them a "managerial" type of job title. It should be kept in mind that while job titles and written job descriptions may be used to help identify an individual as "exempt" in the employer's organization, it is the actual duties of the individual that control whether an exemption to the law applies. For example, the Department of Labor Wage and Hour Division recently investigated a Massachusetts corporation with 300 retail baseball hat stores located throughout the United States for compliance with the FLSA. It was determined that certain store managers who were often required to work more than 40 hours a week while being paid a straight salary were improperly classified by the company as being exempt from coverage under the FLSA even though they held the title of "store manager." As a result, on February 28, 2000, the company agreed to pay 649 employees over $246,000 in back wages for the federal overtime violations.

Calculating Overtime Hours

Another area regarding compliance with the FLSA's requirements is determining whether the hours worked by an employee each workweek is accurately calculated by the employer. The Wage and Hour Division has established that hours worked includes all the time an employee is required to be on duty or on the employer's premises or at a prescribed work place, and all the time the employee is permitted to work for the employer. Work that the employer does not require but permits is considered work time. For example, employees who voluntarily continue to work at the end of the shift must be compensated for that time. Regardless of the reason that the employee stays after his or her shift, the time must be counted as hours worked if the employer knows or has reason to believe that the employee is continuing to work. Furthermore, this rule applies to work performed away from the employer's premises or the job site, and even to work performed at home. See Wage and Hour Division's Fact Sheet No. 022.

Wage Laws for Small Businesses (Cont'd)