Three Easy Ways to Audit for FLSA Compliance

Posted on May 2, 2022 in Compliance

Over the years, I have seen FLSA violators commit silly acts that everyone reading this newsletter knows to be unlawful.  The classic error is paying straight time for overtime, or, the far more aggressive, cash paid off the books for more than 40 hours worked. This newsletter is not for the employer seeking to avoid the law, but rather for those who want to handle it correctly.   So here are three things the honest employer can do to ensure FLSA compliance.

1. Review Lowest Paid Salaried Employees

Employers unknowingly and mistakenly often believe that paying a salary renders a worker exempt from overtime.  This is false.   An employee must also perform specific duties to qualify for exemption under the FLSA.  The Department of Labor has easy to understand guidance on this issue at:  https://www.dol.gov/agencies/whd/fact-sheets/17a-overtime

Even in a workforce familiar with the FMLA, some managers overstate an employee’s responsibilities to try and avoid overtime obligations.  The crafty manager might use broad strokes to describe a very important job; however, the salary the manager wants to pay seems not to match the alleged significance of the role.  The quickest way to catch these misclassification errors is to examine and analyze the lowest paid salaried employees in the workforce.  Depending on the workplace, you might find, by way of example, team leads, entry level managers, accounting staff, dispatchers, and in-house salespersons, who might not perform the duties required for exemption status.

TIP:    Smoke out FLSA concerns comparing the highest paid hourly, non-exempt employees against the lowest paid salaried-exempt.

2. Beware of Creative, Out of Place Job Titles

The law looks to the duties of a position and not the job title.  I find, however, that job titles often lead to unintentional FLSA misclassifications.  Take this common scenario.  An employee wants the grandest job title he can get.  A manager is all to happy to grant that job title if it correlates with what HR typically deems an exempt position that keeps the manager’s costs controlled.   Here the employee and manager are aligned.  But neither the employee nor manager think about the FLSA in this negotiation.  Only when something goes wrong in the relationship does the employee later claim he should have been paid overtime all along.

LESSON:  Review job descriptions for FLSA compliance.

3. Spot Check for Off the Clock

Before COVID-19, employers struggled with work from home arrangements because they present obvious challenges with ensuring all worktime is properly counted.   Now, with hybrid and remote arrangements so prevalent, employers must be very aware of the potential for claims that employees are working off the clock.  Periodic audits should be conducted to confirm all work hours are recorded and compensated.

TIP:    HR should implement semi-annual written questionnaires with remote and hybrid employees to confirm all workhours are reported.

I hope you enjoyed this newsletter!