Don't Get Sued By Your No. 1 Employee

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Published April 17, 2012

| FOXBusiness

How many lunch hours have your workers spent typing away at their desks rather than taking a break? Or how many of your employees have answered e-mails late at night, long after business hours have ended? While you may think you have valuable workers dedicated to your company, what you may really have is a lawsuit waiting to happen.

In the age of iPhones, tablets and ever-present technology, overtime is becoming harder to regulate. However, workers who are putting in extra time are increasingly taking their employers to court seeking payment for their longer hours and more demanding jobs.

The issue reached the Supreme Court Monday, when justices heard arguments in a class-action suit against GlaxoSmithKline filed by pharmaceutical sales representatives. The reps said they are misclassified, as they are exempt from receiving overtime payment.

Karen Harned, executive director of the National Federation of Independent Business (NFIB) Small Business Legal Center, said at the root of the overtime regulation debate is the Fair Labor Standards Act (FLSA). The law establishes minimum wage, overtime pay and recordkeeping and youth employment standards, but is also extremely outdated, having been written in 1938.

“The Department of Labor estimates 70% of businesses are out of compliance with the FLSA,” Harned said. “This just points out how confusing [the law] is.”

And oftentimes, small business owners don’t even realize they are essentially breaking the law. For example, just because an employee is "non-exempt" from working overtime, doesn't mean they are entitled to continue working past their 40 hours per week, if the employer imposes such a regulation.

Here are some tips from Harned on how to avoid a lawsuit and best comply with the FLSA: 

No. 1: Properly classify workers. The Department of Labor is the best place to start, she said. The DOL has descriptions of job titles and duties to help you properly classify your workers into exempt and non-exempt categories. Also determine what is a myth, and what is a fact, she said.

“Just because someone is paid a salary doesn’t mean they are not an hourly employee,” Harned said. “For those who are remotely questionable, you may want to talk to an employment attorney to be sure.”

No. 2: Establish boundaries. Have clear policies on overtime hours and enforce them, Harned said. For example, if you have given your hourly employees a smartphone or cellphone for work use, you should be attempting to monitor that they are not working once the actual work day is up.

“Even if it’s just an e-mail catch-up for five minutes at night,” she said, “that is time they should be paid for. You should have a strict policy that says no work after these certain hours, off-premises.”

No. 3: Take action, and document. If a worker is in violation of your overtime policy, he or she must be notified and this should be documented, Harned said. Such action will be useful if and when a lawsuit arises. 

"You have to be very vigilant about your policies on working off-duty hours unless authorized by a supervisor,” she said. “If you see an e-mail come in at 8 p.m. from Jerry who is hourly, you have to reprimand him.”

The same thing goes for lunch breaks- be sure your workers are taking their due break times, she said. Because if a worker does continue to work through lunch, he or she is entitled to that overtime pay, depending on their classification.

No. 4: Be aware. If and when you are alerted of a policy violation, make sure it doesn’t happen again.

“Take the appropriate steps,” Harned said. “[For example] look at their time sheets; you shouldn’t be blindly signing them. I know of instances where managers sign time sheets when there should be no overtime in there, and they aren’t even realizing that they are authorizing it.”

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