Three Considerations for Businesses to Avoid Overtime Lawsuits

To avoid overtime lawsuits, employers should: (1) classify employees correctly; (2) develop and implement clear overtime policies, and (3) maintain meticulous records of employees’ work hours.

As employers are likely already aware, the Fair Labor Standards Act (“FLSA”) requires employers to pay employees at one-and-a-half times an employee’s regular rate of pay for any hours worked in excess of 40 hours in one week.  There are exemptions to this rule, depending on how an employee is classified.  Please note, however, that wage laws are often written and interpreted in favor of employees.

One of the most frequent type of lawsuits that employees file against their employers relates to unpaid overtime.  Employers then find themselves defending against employees’ claims that the employer violated the FLSA and comparable state laws.  To best protect and defend against such claims, employers should consider the following:

1. Exempt vs. Nonexempt Classification. Nonexempt employees are entitled to overtime pay, and exempt employees are not.  Whether an employee is exempt depends on his or her salary and job duties.  Specifically, employees performing executive, professional, or administrative job duties may be exempt from overtime entitlement.  Classifying employees properly is a nuanced analysis, and employers may want to consult with an employment attorney when determining employee classification.
2. Clear Overtime Policies. Employers benefit from clear, concise policies about overtime that adhere to the FLSA and any relevant state laws.  These policies can define the workweek, require managerial approval for employees to work overtime, and provide for the consequences when employees do not obtain prior approval before working overtime.  An employment attorney can assist with reviewing existing overtime policies or creating such policies.
3. Accurate and Complete Time Records. Employers should maintain detailed records of employees’ work hours.  Detailed time records ensure employers are accurately calculating overtime pay from week to week.  Additionally, well-maintained time records protect employers if an employee brings an overtime lawsuit, because this documentation serves as a compelling basis for an employer’s defense against such claims.

It is alarming for an employer when the working relationship is jeopardized by a dispute with an employee.  By following these three tips above, employers can mitigate the likelihood of employees suing for overtime law violations.  If you are unsure whether your business is in compliance with federal and state overtime laws, or if you need representation to defend against an overtime lawsuit, do not hesitate contacting The Lipp law Firm today.