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Unpaid Overtime

The Fair Labor Standards Act requires that all non-exempt employees who work more than 40 hours in the workweek be paid at least one and one-half times their regular rate of pay for the overtime hours worked.

All time that is considered hours worked must be counted when determining overtime hours worked and wages.

I. Common Employer Mistakes

A. Misclassification as Exempt

In an effort to keep payroll costs down, some unscrupulous employers adopt strategies to avoid paying their employees for overtime hours worked.  One such strategy is to misclassify employees as exempt from overtime when in fact they should be receiving it.  Exemptions commonly relied on by employers to avoid paying overtime are the Administrative, Executive and Professional exemptions, as well as the Computer Professional and Commissioned Sales employee exemptions.

1. Administrative Employees

For you to be denied overtime pay as an administrative employee, each of the following must be true:

Examples of employees who are often misclassified under the administrative exemption include financial service workers, assistant managers and insurance adjusters.

2. Executive Employees

For you to be denied overtime pay as an executive employee, each of the following must be true:

Examples of employees who are often misclassified under the executive exemption include managers of business locations with only one or two employees, like check-cashing or payday loan locations and other small retail or service businesses.

3. Professional Exemption

The FLSA recognizes two professional exemptions: (1) the learned professional exemption; and (2) the creative professional exemption.

For you to be denied overtime pay as a learned professional, each of the following must be true:

Examples of employees who are often misclassified under the learned professional exemption include vocational nurses, and other health care workers who do no have an advance degree.

For you to be denied overtime pay as a creative professional, each of the following must be true:

4. Computer Professional

For you to be denied overtime pay as a computer professional, each of the following must be true:

5. Commissioned Sales Employees

The FLSA recognizes two exemptions covering employees who work on commission: (1) the “outside sales” exemption; and (2) the retail or service establishment exemption.

For you to be denied overtime pay as an outside sales employee you must be customarily and regularly engaged away from your employer’s place of business for the purpose of making sales.  It is not necessary that you be paid a certain amount per week to qualify for the outside sales exemption.

For you to be denied overtime pay as an outside sales employee, each of the following must be true:

B. Misclassification as Independent Contractor

Employers often classify workers as “independent contractors” not only to avoid obligations to pay taxes and make withholdings, but in an effort to avoid requirements to pay minimum wage and overtime.   But simply calling someone an independent contractor does not make it so.

Importantly, even if you are properly classified as an independent contractor for purposes of tax withholdings, you may still be an employee, entitled to minimum wage and overtime, under other laws. Your employer’s use of a Form 1099 does not make you an independent contractor for purposes of overtime and minimum wage laws. Instead, courts consider several important factors to determine whether a worker has been improperly classified as an independent contractor including: (1) the degree of control exercised by the employer over the worker, (2) the worker’s opportunity for profit and loss and the worker’s investment into the business, (3) the worker’s investment into tools and materials, (4) the degree of specialized skill and independent initiative required to perform the work, (5) the duration of the working relationship, and (6) the extent to which the work is an integral part of the employer’s business. No single factor is determinative.  Courts look at all circumstances of a working relationship to decide.

Examples of employees who are often misclassified as independent contractors include satellite dish installers, installers of fiber optics and other telecommunications equipment, delivery drivers, and field or maintenance technicians.

C. Off-the-Clock Work

If you do not meet the requirements of an exemption from the FLSA and are not properly classified as an independent contractor, you are probably entitled to overtime pay.

1. Pre-Shift & Post-Shift Work

You are entitled to overtime pay for all hours you spend working, even time spent working outside your regularly scheduled shift.  Your employer cannot refuse to pay overtime because it was not approved in advance or otherwise authorized.  If your employer suffers or permits overtime work, it must pay you for it.

Sometimes it can be unclear whether pre-shift or post-shift activities are work for which you should be paid.  Time you spend walking, riding, or traveling to and from the actual place where you perform the job you are hired to do may not be considered work.  However, in general, any time you spend that is primarily for the benefit of your employer is work.

2. Denied Meal/Rest Breaks

Under Federal law, employers are not required to provide meal breaks to employees.  But if a meal break is provided, you do not have to be paid for it if it is, in general, 30 minutes or more in length and you are completely relieved from your job duties.  If you are required to perform any work during the break, like responding to calls or emails, assisting customers, or preparing to begin work again, then the entire meal break probably should be paid.

Rest breaks lasting from 5 to 20 minutes do count as hours worked and must be paid.

3. Unpaid Travel Time

Time you spend traveling as part of your job, such as driving from one job site to another during the workday, should be paid. Travel that keeps you away from home overnight generally should be paid when it take place during your normal workday, unless you are merely a passenger.

4. Home Work

Smart phones, laptop computers, and remote access software has made it very easy for employees to work from home or other places outside the workplace. However, time spent in activities of this type, if they are work related, must still be paid.

D. Illegal Tip Pooling or Sharing

As a restaurant employee who receives tips, you may be paid an hourly wage that is less than the minimum wage.  Restaurants are allowed to pay tipped employees less than minimum wage, provided the difference between the hourly wage and the minimum wage is made up in tips.  Under federal law, the current minimum wage is $7.25/hour.  If your employer complies with the tip pool laws and pays you $2.13/hour, they may claim a “tip credit” for the difference between the federal minimum wage ($7.25) and the wage you are paid ($2.13), or $5.12. The difference is paid out in the tips earned by the employee.  The tips and wages you are paid must add up to at least $7.25/hour.  Your employer’s taking a “tip credit” is legal if the employer follows certain rules:

E. Denying Overtime to Drivers

If you drive for a living, except under certain circumstances, you should still be getting overtime pay.  Delivery drivers, route drivers, and service technicians are some examples of employees who should generally be getting overtime.

Long-haul or “over the road” truck drivers may not be entitled to overtime under a Federal law known as the Motor Carrier Act, if they are employed by a motor carrier and haul fright in interstate commerce.

F. Other Mistakes

1. Comp. Time

Paying employees compensatory time or “comp time” for working overtime is allowed only among certain governmental employers.  Private businesses may not give comp’ time as a way to avoid paying for overtime for hours worked in different workweeks.  For example, if you work 50 hours in a workweek and are told that you can have time off the next week for the extra ten hours you worked the previous week, you are not properly being paid for your overtime work.

Young & Newsom, P.C. has its principal office in Amarillo, Texas.