{"id":5887,"date":"2021-01-10T06:44:00","date_gmt":"2021-01-10T06:44:00","guid":{"rendered":"https:\/\/traqq.com\/blog\/?p=5887"},"modified":"2024-09-02T15:55:43","modified_gmt":"2024-09-02T15:55:43","slug":"flsa-rule-3-unauthorized-overtime-threats-to-businesses","status":"publish","type":"post","link":"https:\/\/traqq.com\/blog\/flsa-rule-3-unauthorized-overtime-threats-to-businesses\/","title":{"rendered":"FLSA Rule 3: Unauthorized Overtime Poses Threat To Businesses"},"content":{"rendered":"\n<p>It has been over eight decades since the Fair Labor Standard Act (FLSA) was enacted in America. The law introduced the concept of overtime pay, which compelled companies to compensate their employees for time worked exceeding 40 hours per week.<\/p>\n\n\n\n<p>According to the <a href=\"https:\/\/www.law.cornell.edu\/cfr\/text\/29\/785.11\" target=\"_blank\" rel=\"noreferrer noopener nofollow\">FLSA section 785.11<\/a>, \u201cwork not requested but suffered or permitted is work time.\u201d That is, an employee who is unable to finish a task within the stipulated time must be paid for the overtime worked to complete the job. There were also provisions for ensuring monetary compensation instead of comp time.<\/p>\n\n\n\n    <div class=\"recommended-reading py-8 border-t border-b border-neutral-400 flex flex-col gap-2\">\n        <div class=\"recommended-reading__label text-neutral-600 text-sm uppercase\">Recommended Reading<\/div>\n        <div class=\"post-row\" data-id=\"\">\n            <a class=\"post-row__title subtitle_lg font-[600]\" href=\"https:\/\/traqq.com\/blog\/what-is-compensatory-time-really\/\">Comp Time vs Overtime - FLSA Rules<\/a>\n            <div class=\"post-row__info\">\n\t\t\t\t<ul class=\"list list_divider_dot list_row\">\n    \t<li class=\"list__item\">\n\t\t<a class=\"link link_violet\" href=\"https:\/\/traqq.com\/blog\/category\/time-and-tracking\/\">Time &amp; Tracking<\/a>\n\t<\/li>\n    \t<li class=\"list__item\">\n\t\t<span class=\"\">Sep 2, 2024<\/span>\n\t<\/li>\n    <\/ul>\n            <\/div>\n        <\/div>\n    <\/div>\n\n\t\n\n\n\n<p>As of January 1, when the rule was implemented this year, business owners who were exempt from the jurisdiction of unauthorized overtime found themselves in the same bracket with those who had struggled with the legal liability.<\/p>\n\n\n\n<p>What&#8217;s more is the stats showing an estimated 4.2 million employees, which received the eligibility status to be counted as non-exempt to obtain payment for unauthorized overtime work.<\/p>\n\n\n\n<p>The following notable changes are in the U.S. Department of Labor\u2019s final document:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>The compensation test for Highly Compensated Employees (HCE) will be increased from the current $100,000 per year to $107,432 per year to maintain exemption status.<\/li>\n\n\n\n<li>There must be an increase from the standard $455 per week ($23,660 per year) salary level to $684 per week ($35,568 per year) to qualify for overtime eligibility status.<\/li>\n\n\n\n<li>Employers to count bonuses, incentives, and commissions where applicable, as part of employees\u2019 basic salary level for as much as 10%, because of current practices.<\/li>\n\n\n\n<li>A new revision of salary for workers earning special pay and workers in the movie or T.V. industry within the U.S.<\/li>\n<\/ul>\n\n\n\n<p>According to the DOL, \u201cthe FLSA also doesn\u2019t cover employees of firms with less than $500,000 annual revenue per year and that are not engaged in interstate commerce.\u201d However, this is not always the case when considering the criteria for employee eligibility.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">The FLSA Rule and Interstate Commerce Businesses<\/h2>\n\n\n\n<p>Interstate commerce is defined in the U.S. constitutional law as &#8220;any commercial transaction or traffic that cross state boundaries or that involve more than one state.\u201d This definition broadly applies to nearly all kinds of business.<\/p>\n\n\n\n<p>A business that daily depends on communication to parties operating outside its state of operation, but doesn\u2019t necessarily ship goods to other states, would still be classified under interstate commerce. With this wide range of applications, it implies only a few employers and employees may be exempt from the overtime rule.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Does the FLSA Rule Apply to Exempt Employers?<\/h2>\n\n\n\n<p>Under the jurisdiction of the FLSA, employers with staff <a href=\"\/blog\/working-off-the-clock-heres-why-it-is-illegal\/\" target=\"_blank\" rel=\"noreferrer noopener\">working off-the-clock<\/a> are still legally liable to pay unauthorized overtime. They are obliged to do so as long as the employee satisfies the eligibility requirement. When broadly considered, the FLSA applies to all workplaces.<\/p>\n\n\n\n<p>The introduction of overtime law came at the back of justified reasons, such as the adverse effects of overtime duties on physical and mental health. Recent findings show that prevalent illnesses, such as hypertension, diabetes, anxiety, and depression, are mostly caused by excessively long working hours.<\/p>\n\n\n\n<p>According to another report, employees within the U.S. work more than 50 hours weekly. The main reasons include frequent staff meetings set up by executives and unit heads, too much work delegated to individual employees by superiors, in-office distractions, and defective workplace culture.<\/p>\n\n\n\n<p>While the rule was not primarily to target companies, business owners can hardly regulate unauthorized overtime, which is a challenge for them. According to SESCO\u2019s June 2012 report, &#8220;unauthorized overtime is extremely costly and affects any organization&#8217;s bottom line.&#8221; There are three critical ways unauthorized overtime payment can affect businesses, including the following:<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">1. Pressures on Payroll Management<\/h3>\n\n\n\n<p>Under the FLSA, employers must pay employees overtime at an index of 1.5 the usual hourly rates. Most companies budget their workers\u2019 wages at the start of every financial year. However, such budgets can be adversely affected when employees claim overtime hours worked.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">2. A Tool in the Hand of Malicious Employees<\/h3>\n\n\n\n<p>Without supervision, the FLSA rule on overtime can become a weakness. Ill-meaning employees would seek to exploit and exact &#8216;revenge&#8217; to the business&#8217;s management.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">3. Lawsuit Actions<\/h3>\n\n\n\n<p>Let\u2019s say an employee files a lawsuit or submits claims of unpaid overtime worked hours to the Fed or the state\u2019s DOL. If the ruling favors the employee, the employer may have to pay double the overtime wage. What\u2019s more, they may bear the legal fees and compensation for any damages. The penalties can be even higher if the U.S. DOL&#8217;s audit team discovers any overtime rules violation. That\u2019s the reason employers are mandated by law to submit to auditory by the DOL.<\/p>\n\n\n\n<p>While the problem of employees working overtime may never go away completely, employers are permitted by the FLSA to set measures and policies against overtime duties in the workplace. Section 785.13, Duty of Management of the FLSA states:<\/p>\n\n\n\n<p>Employers can do the following to guard against any violation of the rule in the workplace:<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Set Policy Standards<\/h3>\n\n\n\n<p>A clearly written workplace policy stating the employers\u2019 intentions against overtime duties, with strict penalties for defaulters, can help dissuade employees from exceeding scheduled work hours.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Unit Heads to Ensure Compliance<\/h3>\n\n\n\n<p>To ensure compliance, employers can also assign unit heads to draw a daily work plan and delegate tasks to employees. They can also provide training on using automation systems to track time around the workplace effectively.<\/p>\n\n\n\n<p>Using a reliable time management software can help employees monitor the number of minutes and hours spent working on a task. This will help to assess productivity and employees\u2019 mindfulness with workplace standards.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Overtime Approval Mechanism<\/h3>\n\n\n\n<p>When an employee has justifiable reasons to work overtime, a system or communication route must be provided for seeking approval. The governing committee must assess the urgency and importance of the work before giving its approval.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Internal Audit to Monitor Compliance<\/h3>\n\n\n\n<p>Companies should assign internal audit personnel to monitor every days\u2019 work and assess compliance. It would help increase the effectiveness of the company\u2019s overtime policy. Have automation systems designed to give more in-depth insight and better workplace accountability remotely and in real-time. This way, the personnel can be better equipped to ensure stricter compliance to management overtime policy.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Registers for Time and Record-Keeping<\/h3>\n\n\n\n<p>The management should adopt registers for recording employees\u2019 clock-in and clock-out times. This would serve as an extra layer for employee supervision to avoid surprise overtime claims. However, it is more efficient to use a <a href=\"https:\/\/traqq.com\/\" target=\"_blank\" rel=\"noreferrer noopener\">time tracking software<\/a> such as Traqq.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Finally\u2026<\/h2>\n\n\n\n<p>Conclusively, the best way to curb your employees from overtime work hours is using employee monitoring software to track their productivity and time management. That way, you will be able to provide the necessary training and put a stop to overtime hours for good.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>It has been over eight decades since the Fair Labor Standard Act (FLSA) was enacted in America. The law introduced the concept of overtime pay, which compelled companies to compensate their employees for time worked &#8230;<\/p>\n","protected":false},"author":3,"featured_media":6637,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[565],"tags":[60],"class_list":["post-5887","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-leadership-and-management","tag-overtime-work"],"views":1397,"_links":{"self":[{"href":"https:\/\/traqq.com\/blog\/wp-json\/wp\/v2\/posts\/5887","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/traqq.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/traqq.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/traqq.com\/blog\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/traqq.com\/blog\/wp-json\/wp\/v2\/comments?post=5887"}],"version-history":[{"count":10,"href":"https:\/\/traqq.com\/blog\/wp-json\/wp\/v2\/posts\/5887\/revisions"}],"predecessor-version":[{"id":28985,"href":"https:\/\/traqq.com\/blog\/wp-json\/wp\/v2\/posts\/5887\/revisions\/28985"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/traqq.com\/blog\/wp-json\/wp\/v2\/media\/6637"}],"wp:attachment":[{"href":"https:\/\/traqq.com\/blog\/wp-json\/wp\/v2\/media?parent=5887"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/traqq.com\/blog\/wp-json\/wp\/v2\/categories?post=5887"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/traqq.com\/blog\/wp-json\/wp\/v2\/tags?post=5887"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}