Off-the-clock activities are activities that employees are required to do “on their own time” yet benefit the company. Contrary to what some business owners believe, non-exempt employees cannot “donate” their time to the company by working off the clock.
How employees are classified, whether they are exempt or non-exempt, determines their eligibility for overtime pay. The Fair Labor Standards Act (FLSA) requires employers to pay one and one-half times the regular rate of pay to non-exempt employees for all hours worked in excess of 40 hours per workweek. Some narrow exemptions exist, for example, for bona fide executive, administrative, or professional jobs. Unpaid overtime can therefore be a huge wage-and-hour trap.
Job titles are not enough to clear the classification hurdle. Courts look beyond job titles to the nature and character of the work required by the job. That’s what happened to office-supply giant Staples, Inc. when it was sued by California-based assistant store managers and accused of misclassifying them and exempting them from overtime pay. After eight years of expensive litigation, the suit was finally settled for $38 million. More recently, Wal-Mart agreed to pay $35 million to settle a class action suit by its workers in Washington state who were asked to work through their meal and rest breaks or work off the clock.
The large dollar settlement, however, is only part of the cost. Don’t forget that most settlements occur only after years of litigation and costly discovery conducted by a small army of expensive lawyers.
Approximately 80% of all claims against businesses involve employment matters. Within that group, wage-and-hour class actions represent the fastest growing segment of employment claims. Some commentators have called the exponential rise in wage-and-hour claims a war; others have called it a gold rush. How you characterize it depends on which side of the fight you’re on.
Forward-thinking companies know that wage-and-hour claims are one legal liability they can manage and control. The key to fighting back is to be vigilant in maintaining wage-and-hour compliance. Here are two ways your company can protect itself against wage-and-hour claims.
First, make sure your employees are properly classified. Don’t fall into the “this is the way we’ve always done it” trap. Today’s workplace is more complex than the brick-and-mortar factories of yesteryear with bells or whistles marking the beginning and end of each work day.
Today’s digital workplace makes work portable and 24/7, and former employees can often find themselves outsourced and rehired as consultants or independent contractors. As a result, today’s infrastructure and digital work environment can contribute to inadvertent misclassification between exempt and non-exempt employees and between independent contractor and employee.
Given the huge liability exposure unpaid overtime can represent, having an employment expert help you review your company’s current employee classifications is probably a wise investment. Such experts can also help you evaluate other pay practices, including vacation, travel, minimum wage, and tip pooling.
Second, train managers on wage-and-hour compliance. The best policies in the world are useless if the managers who need to implement them don’t know about them and can’t follow them. A number of wage-and-hour class action cases, for example, were the direct result of good policies but untrained managers who “required” employees to continue working after they clocked out. Don’t let your company be one of them.
Businesses benefit from periodic wage-and-hour tune-ups. They help companies achieve compliance and maintain fair pay practices. In the process, these tune-ups reduce the likelihood of costly litigation and keep the workforce engine humming. It can save you a ton of money. More importantly, happy employees are productive employees who can increase your profitability. Tune-ups are investments that pay multiple dividends.