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Mitigating FLSA Risks

Employers need to be cognizant of the activities of their workforce, especially the FLSA Non-Exempt employees.  Why?  Because the Department of Labor has a little phrase they like to use when holding an employer liable for back wages and penalties which is “suffer or permit” to work.  With the continuous evolution of flexible schedule arrangements, telecommuting, and mobile technology for accessing company systems such as email, business owners are continuously exposed to compensation liability for this segment of their workforce.

Note that this article is not addressing only time worked beyond the established work day, which most people think about when the term overtime is mentioned.  This article is also referencing time worked before the scheduled start time, on weekends, and lunch or meal breaks if provided.  Some businesses establish and communicate a 30 minute lunch or meal break and then automatically deduct 30 minutes from the employee’s timesheet.  This practice can create risk for your business if you are not validating and ensuring that the employee took the break.  If they continued to work through the break, or if management interrupted the break and the employee worked, then the entire time may become compensable.  Following this concept further, if your work week is based on 40 hours, these additional hours you are not tracking or recording properly could result in incurred overtime obligations for permitting the employee to work through the break period.  Think about it this way, 5 meal breaks of 30 minutes each not properly managed and enforced results in 2.5 hours of worked time, resulting in 42.5 hours of work during the week.  Employer now owes employee 2.5 hours at time and a half pay rate.  Multiply this by numerous weeks throughout the year, or just days over the year, and by several employees and you may have a significant problem on your hands that negatively impacts you budget and potentially your cash flow.

Key strategies to consider to help your company avoid this potential liability and legal risk include clear policies and procedures for overtime authorization, scheduled work hours, reporting of time worked, effective and consistent documentation, leverage technology, and use of company systems.  Regardless of your intent to allow or prevent an employee from working when not scheduled to work, when they do, you are liable for compensating them for the time worked.  Certainly, you also have certain rights in holding them accountable for their conduct and non-compliance if you established policies on the topic, but first you must ensure they are paid for all hours worked, and then you can sort out how you are going to handle the infraction and steps to avoid the conduct from continuing.

This may require an analysis of your performance management practices, policies, training, and supervisor consistent enforcement across the workforce.  Raise your awareness of the FLSA regulations and be sure to train your supervisors and managers.

Review this recent Department of Labor settlement agreement here in which the employer mismanaged hours worked recordkeeping and use automatic deductions from payroll for lunch without verifying the break was taken.