Don't Let an Overtime Pay Miscalculation Put You At Risk For A FLSA Violation
The changes to FLSA have most businesses doing evaluation of pay and work hours for each of their employees to determine the potential financial impact of reclassifying employees. In the previous article “FLSA Overtime Rule Reclassification Cost Benefit Analysis” we discussed three cost benefit scenarios for reclassifying three similar salaried exempt employees. The main costs factor in the reclassification discussion becomes how much time the employee is actually working each week and if overtime calculations are going to cause a large increase in his or her pay.
Calculating overtime is not necessarily a straightforward process. There are two common overtime scenarios that cause mistakes, which open the door for FLSA violations and penalties. The first scenario is calculating overtime when non-exempt employees receive commissions or non-discretionary bonuses. The second scenario is calculating overtime for employers using semi-monthly payroll frequency.
Download our Overtime Calculation Tip Guide for detailed description of each of these scenarios.
If the Department of Labor determines that an employee, or employees, should have been paid overtime in the last two years the organization will owe that money to the employee(s) immediately (and three years’ worth of back wages if the error is found to be “willful”). The organization will also owe the employee(s) liquidated damages equal to the amount of money owed, thus doubling the award. The organization would also owe taxes on those wages, as well as interest on the taxes.
Additionally, many states have their own overtime laws, and in most cases the organization can be held liable under both federal and state law, meaning not only would the employee be owed double under the FLSA, but also any liquidated damages or interest under state law, which could easily triple the original amount. There’s also a very good chance that the organization will be held liable for any related attorney’s fees–both its own and the employees’. Finally, there are potential federal civil penalties of $1,100 per violation, state penalties (which will vary), and in some cases the potential for jail time.