When the Obama administration announced changes to the rules governing overtime pay, those changes were met with plenty of accolades from salaried workers not eligible to receive overtime. Now the current administration is rethinking its predecessor's actions, much to the delight of employers who believe the modified rules will be too costly. Lost in the back-and-forth is a simple reality that employers should not ignore: they cannot afford to get overtime pay wrong.
Federal law established under the Fair Labor Standards Act (FLSA) mandates overtime pay at one-and-a-half times the normal rate for all qualifying workers. As an example, a worker earning $7.00 dollars per hour should earn $10.50 for every hour worked in excess of 40.
What happens when employers get it wrong? It means legal action that could result in heavy penalties. Take a recently settled case out of New Jersey as an example. The owners of a chain of South Jersey gas stations will now pay dearly for not correctly paying overtime to more than two dozen employees.
The U.S. Labor Department successfully went after the owners of USA Gas, a gas station chain with numerous locations throughout southern New Jersey. The company's two owners settled with the government after admitting violations of the FLSA regarding time and attendance tracking and overtime pay. The settlement is worth $463,453.
Employees at six different USA Gas locations reportedly worked 70 hours per week for monthly salaries of between $2,200 and $2,400. None of the 27 workers received time-and-a-half for the extra 30 hours worked every week. As a result, half of the settlement money will be paid to them to make up for the back pay each one is owed. The remaining settlement money will be divided equally among all 27 employees to cover damages.
It is possible that USA Gas agreed to settle rather than go to court because the settlement would cost less. Had the company gone to court and lost, there would also be fines and court costs involved. It was cheaper just to agree to the settlement and move on.
The point of this post is not to pass judgment on the owners of USA Gas in regard to their time and attendance and overtime policies. We have no way of knowing whether their actions were intentional or out of ignorance. But according to Dallas-based BenefitMall, their motivations should be irrelevant to other business owners. The fact is, no business owner can afford to get overtime pay wrong.
You have heard the phrase, 'pay me now or pay me later'. When it comes to labor and wage laws, it is an idiom that is profoundly true. It is critically important that employers get overtime pay correct so they do not have to pay both back wages and damages down the road.
In the New Jersey case, the business owners ended up paying twice what they would have paid had they done everything according to the law. In the end, they saved nothing. In the end, their mistakes cost them more than $230,000. That is a lot of money to spend for not being accurate with time and attendance and overtime pay.
BenefitMall encourages employers to take a serious look at their current time and attendance policies along with the actual means they use to track it. They should also ensure that every employee who is eligible for overtime gets paid what is rightly owed following every pay period. The price for getting it wrong is far too expensive.