There have been a growing number of overtime lawsuits in recent years. These overtime lawsuits are not restricted to the large corporations either; small businesses are just as vulnerable. How to avoid overtime lawsuits is something every business owner should know.
Why Overtime Lawsuits are More Common
The economy is somewhat responsible for the growing number of overtime lawsuits, as many employers are suffering from falling sales numbers, and overtime hours are becoming more challenging to afford. Some employers are trying to find other ways to compensate employees for extra hours instead of paying them overtime pay.
When the economy becomes sluggish, employees find they lose their leverage and are less likely to leave a job even though conditions are not quite right. Managers in business know their employees are more tolerant of what is considered ‘unfair’ conditions and are more likely to impose them.
But if an employee is not paid the overtime pay they deserve, you as an employer are at risk for an overtime lawsuit. Employees are going to expect this pay, especially if they are working more hours week after week. Overtime lawsuits are becoming more common, and as an employer, you face the risk of this legal action as more and more employees are beginning to retaliate against unfair pay.
Common Mistakes Discovered in Overtime Lawsuits
When times are tough, even the most righteous employer might find themselves going to the extreme. If you want to protect your business, these are some of the common mistakes discovered in overtime lawsuits that you should avoid:
- Employers allot comp-time as their overtime pay
- Refusals to pay for overtime they consider ‘unauthorized’
- Adjusting timesheets to reduce the number of overtime hours
- Paying only a set weekly wage and not tracking any hours worked
- Continuing to pay straight time even though hours worked add up to more than 40 in a workweek
- Not keeping records of employee timesheets for a minimum of two years
- Misclassifying exempt and nonexempt employees
- Calculating biweekly the number of overtime hours rather than weekly
- Not being aware of the overtime laws in your state
Federal labor laws and industry regulations mandate how overtime hours are to be paid. As an employer, you need to stay-up-date on these laws as well as those imposed by your state, and if applicable, union agreements.
Best Practices for Avoiding Overtime Lawsuits
You have never been at a greater risk of an overtime lawsuit than you are now. These lawsuits are skyrocketing, and the most common wage and hour allegation is not being paid fairly for overtime hours. The Fair Labor Standards Act (“ FLSA”) (which governs the payment of overtime and minimum wage to employees) requires that you pay an employee 1 1/2 times their regular wage to all non-exempt employees for any hours over 40 they’ve worked in a week.
The law is going to favor the requirement most beneficial to the employee. If you fail to calculate an employee’s overtime correctly, you are at risk of being taken to court in an overtime lawsuit. To avoid being taken to court, you should follow these best practices:
- Create definitive overtime policies and ensure all employees and managers understand them clearly
- Meticulously track all work hours, including calculating overtime pay. Using a labor-management system will help you avoid errors found in manual calculations
- If applicable, use a system which will correctly calculate an employee’s weighted average pay if they are performing different duties at different pay rates
- You want to ensure your system creates detailed overtime reports. These systems will allow you to track and correct overtime issues, enforce your overtime policies and be valuable as disputable evidence should you find yourself involved in an overtime lawsuit
Danz Law (danzlaw.net) is an experienced attorney working with employment laws. If you find yourself involved with an overtime lawsuit, contact our office for comprehensive representation. Our firm has experience working in complex employment litigation in both state and federal courts and are ready to help defend you against these charges.