Know the rules of wages

PBN Staff

03/27/2010

With federal budget deficits soaring, the so-called “tax gap” has returned to center stage in Washington. That’s the amount of money Uncle Sam believes he’s due, but hasn’t been able to collect for a variety of reasons.
As a result, the government is beefing up enforcement of existing rules, and proposing or implementing new ones that will create even more traps and compliance requirements for small employers.
One giant target for federal enforcers is worker misclassification. Basically, that’s when you pay somebody as an independent contractor – thus avoiding the need to withhold payroll taxes – rather than as an employee. The new federal budget hands the U.S. Department of Labor (DOL) an extra $25 million to pursue misclassification miscreants in a joint effort with the Treasury Department.
Implications for small business are wide-ranging. “Minimum wage and overtime laws can be confusing, but not paying the proper wage to an employee can quickly turn into an expensive headache,” said Karen Harned, executive director of the NFIB Small Business Legal Center.
Now is an excellent time to make sure your business hasn’t run afoul of wage and hour rules. To avoid penalties or claims from disgruntled employees, make sure your business hasn’t fallen into these common traps listed by Harned.
1. Allowing hourly employees to waive their right to overtime pay. An employee may not waive his right to overtime pay. Even if an employee is instructed to only work 40 hours per week, any hours actually worked over 40 hours in a seven-day workweek will be subject to overtime pay. An employer can instruct an employee not to work more than 40 hours per week, and generally may discipline an employee who works unauthorized overtime.
2. Averaging the hours worked over two weeks. Even though the employer uses a two-week pay period, the FLSA treats each workweek as a single unit. If an employee works 42 hours in one week, the employee must be paid the two hours of overtime, even if the employee only works 20 hours in the subsequent week.
3. Giving time off instead of cash. The FLSA is highly biased in favor of cash compensation rather than “comp time.” Neither the employer nor employee can agree to or insist on comp time in lieu of overtime pay.
4. Treating all salaried employees as exempt from FLSA overtime rules. Being a salaried employee is not solely sufficient to classify an employee as exempt from FLSA overtime requirements. &#8226

Daniel Kehrer can be reached at
editor@business.com.

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