FinanceRegs.com » OT regs

FLSA violation costs $35M in back OT and damages

Carol Katarsky — Tue, 17 Mar 2009 11:00:14 +0000

Where to draw the line on who is or isn’t an exempt employee isn’t always clear. One company just got hit hard for making the wrong call. In a recent ruling, Family Dollar Stores was ordered to pay more than $35 million in back overtime pay and damages to more than 1400 current and former store managers.

The Eleventh Circuit Court of Appeals said that the managers, who were routinely expected to put in shifts totally 60-70 hour per week, were wrongly treated as executive employees exempt from OT.

According to the appeals court, the managers were non-exempt for three main reasons:

They spent 80-90% of their time performing non-exempt labor (running cash registers, stocking shelves, etc.)
Non-exempt tasks were considered an “essential” part of the managers’ jobs, as opposed to “incidental.”
Managers had relatively little freedom. Instead, district managers handled most managerial decisions, such as pricing, choosing inventory, etc.
The average manager’s “exempt” salary was barely more than the average assistant manager’s salary.

Cite: Morgan v. Family Dollar Stores, Inc.; 11th Circuit Ct. of Appeals, 12/18/08.

Paperwork error that cost $1.8M

Carol Katarsky — Tue, 10 Feb 2009 11:00:36 +0000

As if you needed more proof that misclassifying workers could cost your company big time: A temp agency in Massachusetts was just ordered to pay more than $1.8 million in back overtime pay to 973 employees.

The company had wrongly classified the employees as exempt. Four of the employees worked in the company’s main headquarters, the others were placed in temporary assignments around the country.

The workers found to be misclassified worked in a variety of positions: technical writers, payroll analysts, accountants, sales reps and a variety of IT-related jobs.

FLSA penalties add up for couple who kept slaves

Carol Katarsky — Tue, 27 Jan 2009 11:00:00 +0000

It’s an extreme case, but it has lessons for every company: Not meeting your employer obligations can cost you big time. A New York couple, Varsha and Mahender Sabhnani, were ordered to pay more than $936k to two women “employed” as domestic workers. The Sabhnanis were also sentenced to 132 months and 40 months in jail respectively.

Their crimes, according to a U.S. District Court include forced labor, harboring aliens and peonage. But the bulk of the fine comes from their failure to pay the appropriate minimum wages, overtime pay and other violations of the FLSA.

Domestic employees are treated somewhat differently than others when it comes to overtime rules, but these rules didn’t apply in the Sabhnanis’ case. The court ruled the two women “workers” didn’t qualify for the exemptions because of their treatment in the house: They were beaten, had no private quarters and generally slept on the floor.

Granted, no one would defend that kind of treatment of workers. But it’s worth pointing out that as bad as the treatment the Sabhnanis dished out to their workers was — what really cost them was the lack of attention to basic employment law.

Payroll reminder: Daylight Savings ends Nov. 2

Carol Katarsky — Fri, 10 Oct 2008 10:00:15 +0000

It happens every year: The clock rolls back one hour — and Payroll has to deal with confusion about how to pay shift workers during that “missing hour.” The basics: If your company has any shift workers on duty at the time that Daylight Savings Time (DST) ends, they’re working an hour longer than the usual shift. To meet its obligations, your company has to pay those workers one extra hour — and that hour must be included for the purposes of calculating the regular rate of pay and any overtime.

Don’t forget: DST officially ends at 2 a.m. on Nov. 2. Arizona, Hawaii, American Samoa, Guam, Puerto Rico, and the Virgin Islands don’t observe DST.

To head off questions, make sure you explain how the calculations work to any affected workers – and their managers. Otherwise, you could have to deal with a lot of grumbling from misinformed workers who think they’re going to get “cheated” out of extra pay.

Fluctuating workweek: When you can’t use it for OT

Carol Katarsky — Mon, 25 Aug 2008 10:00:49 +0000

Be careful: You can’t use the “fluctuating workweek” method to calculate overtime pay for certain employees.

The fluctuating workweek method can’t be used to pay any employees who were misclassified as exempt from OT. That’s due to a ruling from a U.S. District Crt. in Texas.

The court ruled that the fluctuating workweek method was adopted for specific situations and doesn’t apply to workers who were wrongly treated as exempt from OT.

Under the FLSA, damages for nonexempt workers who were classified as exempt are assessed at twice the unpaid overtime compensation.

Cite: In re: Texas EZ Pawn FLSA Litigation,