05 / 14 / 2014

Record It or Lose It

The Federal Labor Standards Act (FLSA) is a multi-faceted statute that came into existence at the end of the Great Depression.  That law, which was dormant for several decades, took on new vigor in the past decade, becoming more vigorous with the Great Recession. The goal of the law is laudable:  provide fair working conditions for employees, and compensate them for the time worked, all within a reasonable work week.  The law created the concept of overtime, to pay non-exempt employees overtime for hours worked in excess of forty hours per week.   However, the FLSA places the burden on employers to track employee time to determine if overtime is warranted.  For many small to mid-sized businesses, especially businesses in the energy and medical services sector, it is one of the most draconian laws targeted at employers.  Many business owners walk into the cross hairs of the FLSA because of simple failing:  inadequate record keeping.

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For hourly employees, a business owner must have procedures in place to generate and maintain documentation of the number of hours each employee works each day and each work week (a work week need not be Monday to Friday, but it must encompass a week).  If an employer does not maintain employee time sheets and related documentation, an employee may merely allege the number of hours he or she worked (even the time they spent surfing the internet) – without providing the business owner the opportunity to argue that the employee’s estimates are not accurate.  For a single employee, a business owner’s failure to keep records may cost the business thousands of dollars, and several thousand more in attorney fees.  When employees band together in a class action lawsuit, this can bankrupt an otherwise healthy medium-sized business.

There are exemptions to the FLSA, such as basic categories for some employees who conduct sales or who provide administrative services.  However, FLSA exemptions have limited parameters, and any business owner seeking to claim shelter under them must tailor the employee’s role and responsibilities to the exemption.  Arguing after suit has been filed about possible exemptions, or exemptions thought to exist, is an expensive, slow process that has an excessive and destructive effect on smaller and medium-sized businesses.

To prevent these consequences, there are a few simple first steps in the direction of safety for your business.  Maintain accurate records.  Classify your employees according to their roles and responsibilities.  Pay your employees at least the minimum wage and legal overtime rates.  Make sure that your divisional managers and administrators maintain reliable and consistent records.

At the Vethan Law firm, we are a full-service business law firm.  We work closely with businesses to ensure that their operations match their needs, as well as their policies and procedures, and that their operations fall within the bounds of the FLSA and other laws.  We also work with businesses that have been sued under the FLSA, and counsel companies about available options to defend these lawsuits.

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