The Fair Labor Standards Act (FLSA) can be difficult to understand and apply. Couple that with the fact that the Iowa Wage and Hour Division and the Federal Department of Labor are increasing their enforcement efforts and it becomes clear that employers need to ensure their compliance with wage and hour laws. There are a few troublesome areas for many employers:
1. Classification of employees: Employees can be classified as exempt (meaning overtime pay is not required) or non-exempt (meaning overtime is required). The traditional exemptions include, administrative, executive, professional, outside sales, and computer employees. Deciding which employees fit into the exemptions can be tricky. The DOL has issued fact sheets for each of the exempt classifications that may be helpful in making the decision. You should review thefact sheets in light of the employees’ job duties to determine whether you have classified employees correctly.
2. Classification of independent contractors: Another major classification problem that the DOL is cracking down on is classifying individuals as independent contractors rather than employees. The DOL has also issued a fact sheet to help determine whether an individual qualifies as an independent contractor or not.
3. Breaks: Employers may, but are not required to provide breaks to employees. Additionally, breaks in excess of 30 minutes can be unpaid. If you provide an unpaid lunch break (or other 30 minute break) an employee must be completely relieved of their duties. The problem arises when employees fail to take the designated break. If an employee fails to take the designated break, you are required to pay that person for the time worked, which may result in overtime hours for that employee. It is important that you monitor and enforce any unpaid lunch break that you provide.
4. Bonuses: Bonuses paid to non-exempt employees may need to be included in determining the employee’s regular rate for the purposes of determining the appropriate overtime rate. Discretionary bonuses are not included in an employee’s regular rate.
5. Policies restricting overtime: Policies restricting overtime or requiring authorization for overtime are lawful. Policies such as these, however, do not exempt an employer from paying overtime if an employee works over 40 hours in a workweek. An employer may discipline an employee for working overtime or not getting authorization, but must still pay the employee for all hours worked in the workweek.
There are a number of other problems that many employers face when applying the FLSA, particularly relating to determining “hours worked”. If you have questions about any of the listed problems or potential problems you face you should contact your attorney.