It's easy for small business owners to get swamped trying to comply with federal and state labor law requirements. The Fair Labor Standards Act establishes state minimum wage, overtime pay, recordkeeping and youth employment standards, according to the U.S. Department of Labor, however many of its' aspects are not cut and dry for small companies.
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Elizabeth Milito, senior executive counsel at the National Federation of Independent Business, said the law is very complex and antiquated, making its stipulations hard for small business owners to understand.
"The FLSA came about in 1938, and our workplace has changed dramatically in the past 60 years," Milito said. "The Fair Labor Standards Act has not. We are in a workplace with modern issues like telecommuting and flexible workplaces, but employers are still required to comply with the same statute that was initially enacted to address an industrial workplace."
Small business owners can easily fall out of compliance with the FLSA, she said, often unknowingly. For example, just because an employee is "non-exempt" from working overtime, doesn't mean they are entitled to continue working past their 40 hours per week, if the employer imposes such a regulation.
Making a small mistake can be costly for small businesses, she said, and with overtime, the details matter.
"Small violations over a large number of people can be big bucks for a small employer," Milito said. "If an employee is not paid 15 minutes overtime per day, and they make $10 an hour and can receive back pay for up to three years, you're looking at several thousand dollars."
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Here are Milito's tips for getting overtime laws right:
No. 1: Be proactive. Milito suggests small business owners conduct an audit on their own companies and look into their current business practices.
"Take a look at their job descriptions to make sure the employees and their classifications are correct," she said. "Don't assume they are not entitled to overtime because they are salaried." The Department of Labor has specific classifications for exempt and non-exempt workers, according to their job descriptions, she said.
No. 2: Prohibit off-the-clock work. Don't let your non-exempt employees work overtime, unless they have gotten specific permission from their managers. If employees continue to work non-authorized overtime, Milito said you may have to take action.
"This doesn't mean you can deny them payment," she said. "You still have to pay them for all of their time worked. But, you can take disciplinary action against the employee, up to and including termination." Make sure you are communicating to your employees that these restrictions are for their benefit, Milito said, to ensure they are getting paid for all of their time worked.
No. 3: Investigate complaints promptly. If an employee alleges they are entitled to overtime, but you have classified them as exempt, be sure to launch an investigation.
"You need to take this seriously and contact a lawyer," Milito said. "Also run through the Department of Labor rules and review their job descriptions. And notify the employee of the results of your investigation."
The NFIB will hold a free Webinar, "Busting the Myths: What Small Businesses Need to Know About the FLSA," on July 13 at noon. To register, click here.