Wage and Hour laws, such as the Fair Labor Standards Act (FLSA), present some of the most challenging hurdles for employers. The FLSA and its state and federal counterparts carry extraordinary penalties and, if an employee successfully brings suit to collect unpaid wages, employers are left holding the tab for the wage amount, multiplied twice, and the plaintiff’s attorney’s fees. This makes a claim for unpaid overtime a huge risk for employers and an even bigger attraction for plaintiffs’ lawyers.
So why don’t employers “just” abide by the laws and avoid these risks? Well, I suppose for a lot of reasons. One that we hear quite often is that, “everyone” in their industry pays this way!! And they’re likely telling the truth. Often industries develop certain wage payment practices especially suited for the unique way in which their employees work. Some companies, for example, are highly seasonal and tend to employ a great deal of teens during summer months. To avoid the paperwork nightmare for employee benefits, they pay the young people on a “per diem” rate.
Or, what about the salon industry? Stylists’ earnings are based partially on service-based commissions, partially on product-based commissions, as well as a flat hourly rate. But then, just to make it more complicated, many salons historically have required stylists to reimburse the business for the products that they use. Sort of like the typical office worker reimbursing their employers for each pencil they use to perform their jobs. As you can probably imagine, these unique pay arrangements can create major wage payment nightmares if the Department of Labor becomes involved.
And still, when an employer calls us to seek counsel on an employment matter and learns of the great perils of their payroll system, they just do not want to believe us. It is not uncommon for them to resist a payroll restructuring. In part because change can be difficult, time- and resource-consuming, and, well, just because the idea of change puts most of us on high alert, even if just temporarily.
But another, very common, reason for the push-back we get from otherwise loyal and trusting clients? “Because everybody pays like this!!” It can be difficult to change your payroll habits, certainly. But think of yourself as a trendsetter. Or, better yet, think of yourself laughing all the way to the bank as competitors get stuck with serious fines, penalties, and civil suits. Then call your employment counsel and have them conduct an audit of your compensation structure.
EXTRA: For those of you just dying to know more about overtime calculations, take a look at the Department of Labor’s handy Overtime Calculator. You answer a series of uncomplicated but unexpectedly detailed questions and, voila! The Calculator pops out the amount of overtime owed, if any, to the employee. It is a great tool (and free), thanks to Uncle Sam, so take advantage of it next time you’re pondering the world of wage payment.