Tuesday, September 16, 2008

Paying Overtime Correctly

Failure to pay overtime to certain employees is an issue that can get you entangled in expensive litigation. Under state law, employers are required to pay certain employees overtime wages of one and one-half of each employee's regular hourly wages.

There have been overtime abuse class action law suits filed against some very high profile employers recently. Here are just a few:

Home Depot. Managers-who are generally exempt from state overtime pay requirements-were asked to regularly perform the same tasks as hourly co-workers who were eligible for overtime pay. A class of 2,000 employees sued for estimated total damages of $100 million.

J.P. Morgan Chase & Co. Employees in a New York call center filed a class action for unpaid overtime wages. Plaintiffs alleged that Chase promoted employees to re-titled "management" positions, even though the employees’ job functions remained the same.

Allstate. Employees filed a class action against the home and auto insurer for allegedly refusing to pay overtime to its adjusters. It routinely assigned them so many claims that they had to work nights and weekends. Approximately 3,000 employees were eligible to receive payments.
Allstate could pay as much as $120 million to settle these unpaid overtime claims.

Similar lawsuits have been filed against RadioShack, Starbucks and Lowes.

Certain kinds of employees are exempt from the payment of overtime. For example, administrative staff, professionals and executives. However, you must have clear understanding of which employees fit within these exempt classes.

Penalties for non-compliance can be high, including paying all back wages, plus unpaid taxes and penalties, penalties up to the amount of the unpaid wages, plus your employees' attorney fees.

The US Department of Labor has an excellent FAQ covering this issue: http://www.dol.gov/compliance/guide/minwage.htm

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