Question of the Week
How do I avoid getting sued for overtime pay?
Businesses need to carefully manage and monitor the hours employees work, and whether the employees are eligible for overtime pay, or they could likely face a lawsuit for violation of the Fair Labor Standards Act, known as Florida’s minimum wage law. Lawsuits for overtime or minimum wage payments are epidemic. In South Florida, on any given day, between 1/3 and 1/2 of the civil cases filed in federal court are brought under the Fair Labor Standards Act, which provides overtime and minimum wage standards. There is a cottage industry of lawyers who represent employees suing for overtime and minimum wage payments. There are now law firms advertising on television for overtime claims. The cases are stacked against employers because plaintiffs’ attorneys are entitled to their fees for even small awards, and yet, for all practical purposes, employers cannot recover their attorneys’ fees against employees. Often, plaintiffs make a claim for a few hundred dollars, but the lawyers demand thousands of dollars to settle the claim.
The threshold to avoiding Fair Labor Standards Act claims is to properly categorize employees and to pay overtime to those who are eligible for it. Most employers are familiar with the standard exemptions to overtime—in other words, the categories of employees who are not eligible for overtime no matter how many hours they work. The general exemptions are: (1) Professional Exemption—lawyers and doctors are not eligible for overtime; (2) Executive Exemption—Managers who manage people are exempt; (3) Administrative Exemption—Employees responsible for certain administrative functions, for example, the human resources manager, is exempt from overtime. There are also specific exemptions for Computer Employees and Outside Sales Employees. An employer must be careful to ensure that employees fall within the exemption before deciding not to pay overtime. It is a fact specific inquiry to determine any exemption.
There are also narrower, specific exemptions for different job functions. We recently obtained a summary judgment on behalf of an employer sued by an employee whose job was to drive passengers to and from local airports. We successfully argued that the employee fell within a specific exemption to the Fair Labor Standards Act, the “taxicab exemption,” and was therefore ineligible for overtime. There are other specific exemptions that apply to very narrow job functions, from employees engaged in selling or servicing cars at car dealers, to certain employees employed in a movie theater, those “engaged in the processing of maple sap into sugar,” certain employees of air carriers, and various types of agricultural employees.
Once it is determined that an employee does not fall within any exception and is eligible to be paid overtime, the way to avoid overtime suits is to keep accurate records, and pay overtime where required. In FLSA cases, the burden is placed on the employer to keep records and prove the hours worked. There are many cases in which employees claim some vague amount of extra work, but the employer cannot demonstrate the actual hours. It is critical for employers to have a written or computerized system of tracking time, and preferably one in which the employees must sign or verify the document, and the employer must keep the records for at least three years, in order to defend a possible FLSA case.
No reputable business tries to cut corners on overtime or minimum wage, but sometimes there are mistakes, misunderstandings, or even employees gaming the system to work more hours, and then demand overtime pay. The important thing is to confront and fix the problem quickly. If an employer gets served with an overtime or minimum wage case, it is critical to tackle the case immediately. Once one employee has sued, others often follow, so it is important to determine the possible exposure, and, if there are any mistakes or problems, to fix them right away before other cases follow.
For more information, please contact Greg Schwinghammer.
