Tag Archives: employee compensation

Salaried Employees are Paid Overtime, The Right System for Paying it can save Countless Dollars

One Hundred Dollar bill with Marijuana leaf on top of it.

One of the biggest reasons that employers get sued for wage violations, is they think that they do not need to pay their salaried employees overtime. Salarieed employees get overtime, unless they meet one of the exemptions (exceptions) from overtime requirements under the Fair Labor Standards Act (FLSA). Basically, if an employee is entitled to overtime pay as an hourly worker, they are, usually, entitled to overtime pay as a salaried worker.https://www.dol.gov/whd/regs/compliance/whdfs23.pdf

An employer can save money on overtime by paying a salary, under certain circumstances, but setting up such a system is best done by an experienced employment lawyer, because getting it wrong can cost you countless lawsuits. When I represented plaintiffs, I brought cases against large companies that used employment firms to design their pay systems, and I found ways to get my clients substantial sums. It is not just necessary to get it most of the way right, if an employer plans to save money by taking advantage of labor laws, the employer does not just have to get it right, but perfect, to get out of a lawsuit.

If a small employer wanted to move someone from hourly to salary to save a few dollars on overtime, then as an employment lawyer I would advise that is a poor decision. However, if a medium or large company is considering moving multiple employees to salary, to save on overtime, it is worth consulting with an employment lawyer.

There are two factors. The first is if the number of hours the employee works varies throughout the year. The second is what the employer and and the employee understand the salary is meant to cover. A worker and employer cannot agree that no overtime payment is owed for hours worked over forty per-week. An employer must pay over-time for hours worked over forty per-week, the only question is whether payment is one-half times the regular rate, or one-and-one-half times the regular rate.

The first factor has to do with the Fluctuating Work Week Method, codified at 29. U.S.C. § 778.114. https://www.law.cornell.edu/cfr/text/29/778.114 The Fluctuating Work Week Method allows an employer to save money by paying less per-hour in regular hourly rate, and one-half that rate for every hour over forty worked in a week. A lot of large companies use this method. Basically when a worker’s hours fluctuate throughout the year, so some weeks the worker works more than forty hours, and some weeks the worker works less than forty hours, but the worker is paid the same base salary, the worker can be paid less in overtime, to make up for the times when the worker works less than forty hours and still makes the salary. When executed properly, this system can save a company an enormous amount of money in overtime payments, because the overtime rate is one-half of the number gotten when the total weekly salary is divided by the total number of hours worked that week.

While the Fluctuating Work Week Method is very attractive, strict compliance with countless conditions is necessary, requiring a meticulously structured system with built-in safeguards.

The second factor is what the understanding of the salary is between the employer and employee. https://www.law.cornell.edu/cfr/text/29/778.108 Does the employee and employer understand that the salary is to cover all hours worked in a week, or does the salary cover a specific number of hours per-week.

If the understanding with the employee is that the salary is to cover forty hours per-week, then every hour over forty that the employee works, must be paid at one-and-a-half times the employee’s normal hourly rate. However, if the employee and employer come to an understanding that the salary is to cover fifty hours per week, from hours forty-one to fifty, the employer pays one half the normal hourly rate, and for hours fifty-one and over, the employer pays the worker one-and-a-half times their normal hourly rate. In order to get the regular hourly rate, to base overtime off of, the employer divides the salary by the number of hours it was intended to compensate, and that number is halved or paid at one-and-a-half times per-hour.

If the employee and employer agree that the salary is to compensate all hours worked in a week, no matter how many, all overtime hours are paid at the rate obtained by multiplying .5 by the weekly salary, divided by forty.

Written by: Joshua H. Sheskin, Esq., M.A. -Trial Counsel- Lubell & Rosen, LLC. 954-880-9500 JHS@LubellRosen.com

YOU CANNOT AGREE WITH YOUR EMPLOYEES THAT YOU DO NOT HAVE TO PAY THEM OVERTIME, EVEN IF THE AGREEMENT YOU MAKE PAYS THEM MORE

The right to overtime under the Fair Labor Standards Act (FLSA) cannot be given up in an employment contract, or agreed between the employer and employee not to apply. In hundreds of FLSA cases I have been involved in, one of the most common things employers are sued for is coming up with ways to pay their employees more, but that do not pay them overtime at one-and-one half times their regular hourly rate. Often times these employers tell me that the employee gladly signed a contract to be paid that way because it meant more money. A contract to pay less than one-and-one-half times the regular hourly rate for overtime hours is an illegal contract and completely unenforceable. An employee cannot give up his/her right to overtime, and an employer cannot agree to not follow the law. However, if you do want to pay your employees in a way that is not a strict hourly rate, and one-and-one-half times that rate for overtime, there are ways to do that for some employees. Other employees the Fair Labor Standards Act (FLSA) does not require you to pay overtime to. While exceptions to overtime laws can be applied to some employees, and other employees can be paid a salary that reduces the overtime rate (salaried employees are entitled to overtime), complex legal rules apply. Implementing a system of payment that does not subject you to lawsuits usually requires a labor lawyer. The Fair Labor Standards Act is a specialized field. To have a specialist help you avoid costly lawsuits call or email Joshua Sheskin at Lubell Rosen today – By: Joshua H. Sheskin, Esq., 954-880-9500 – JHS@LubellRosen.com