Thursday, July 20, 2006
Litigation Over FLSA Wage and Hour Overtime Disputes Grows
The US Department of Labor reports that wage and hour disputes, primarily over improper overtime compensation, have tripled since 1997. The Fair Labor Standards Act (FLSA) sets the standards for compensation, including minimum wage and overtime treatment rules.
FLSA suits now for the first time out number discrimination law suits. Why this sudden increase in FLSA wage and hour disputes? Industry specialists point to several factors as the root cause of this increase.
First, FLSA suits are easier to win than discrimination suits. The burden of proof lies with the employer, and employers typically maintain inadequate records at best. Poor time tracking, errors in overtime calculations, and improper deductions from payroll are common employer mistakes.
Secondly, press coverage of the 2004 clarification of exempt vs. non-exempt employees was widespread and heightened awareness among employees. Nannies and other household staff are always non-exempt employees by definition, and they are entitled to overtime compensation for hours worked over 40 in a week.
Lastly, successful suits have a snowball effect. A successful claim by a housekeeper gets publicizied, and a claim by a nanny follows.
What can employers do to minimize their exposure to FLSA claims by current or former household staff?
A live in nanny must be paid for every hour on duty at the agreed hourly rate; the live out nanny is entitled to overtime (time and one-half) for hours over 40 worked in a week. More information can be found in the HomeWork Solutions' Frequently Asked Questions.
FLSA suits now for the first time out number discrimination law suits. Why this sudden increase in FLSA wage and hour disputes? Industry specialists point to several factors as the root cause of this increase.
First, FLSA suits are easier to win than discrimination suits. The burden of proof lies with the employer, and employers typically maintain inadequate records at best. Poor time tracking, errors in overtime calculations, and improper deductions from payroll are common employer mistakes.
Secondly, press coverage of the 2004 clarification of exempt vs. non-exempt employees was widespread and heightened awareness among employees. Nannies and other household staff are always non-exempt employees by definition, and they are entitled to overtime compensation for hours worked over 40 in a week.
Lastly, successful suits have a snowball effect. A successful claim by a housekeeper gets publicizied, and a claim by a nanny follows.
What can employers do to minimize their exposure to FLSA claims by current or former household staff?
- Write a FLSA compliant work agreement. Make sure that the household worker's compensation is stated in $/hour terms. The HomeWork Solutions' Hourly Pay Rate Calculator can help with this.
- Maintain accurate, contemporaneous time tracking records. This is easier than it sounds. Many families with nannies successfully put the Nanny Log to work as a time keeping record. Families may purchase a Week at a Glance calendar at any office supply store and have the worker document their daily start and stop times there. At the end of every week, tally up the hours worked and have the worker sign the tally.
- Pay overtime when due. All families occasionally require additional hours or days worked from their household staff. Paying the overtime when earned can save many headaches later down the road.
- If a bonus is offered in your work agreement, make it discretionary. To qualify as discretionary, both the fact and amount of the bonus must be completely within the employer's discretion. A guaranteed bonus - for example 2 weeks payroll at the end of a year's service - will change the employee's regular rate of pay. In this hypothetical, the employee earning $500 per week for a 40 hour work week would have an regular rate of pay of $500 * (52 weeks pay + 2 weeks guaranteed bonus) / 2080 hours = $12.98/hour. All overtime paid in the prior year legally would have to be recomputed at this new regular hourly rate.
A live in nanny must be paid for every hour on duty at the agreed hourly rate; the live out nanny is entitled to overtime (time and one-half) for hours over 40 worked in a week. More information can be found in the HomeWork Solutions' Frequently Asked Questions.
