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Wage and Hour lawsuits under the Fair Labor Standards Act (FLSA) have hit a record high once again, representing a 438% increase since 2000. If you run your own back-office for your contractors, you, as their employer, assume the responsibility of compliance and could be at risk for FLSA lawsuits.

FLSA cases hit an all-time high of 8,126 for the period between April 2013 and March 2014, according to the Society for Human Resource Management (SHRM), citing data from the Federal Judicial Center. This is an almost 5% increase over last year when 7,764 cases were filed, and this is the seventh straight year of increases. Even more cases were filed in state courts under state wage and hour codes.

This shows how intense the enforcement and focus on wage and hour issues has become. Some driving forces include the movement to raise the minimum wage and President Obama’s recent directive to the Department of Labor (DOL) to revise the regulations that allow certain workers to be exempt from overtime (“white collar exemptions”).  All of the publicity surrounding wage and hour regulations has also increased employee awareness of those regulations, making them more likely to file FLSA lawsuits.
This is a good time to remind you of some of the key provisions of the FLSA. Even if you do not employ any contractors or in-house staff, your clients look to recruiters as an employment resource, so it is important for you to know the basics of this law:

  1. Most employees are entitled to overtime (1.5 times the regular pay rate) when they work more than 40 hours in a work week. Keep in mind that the overtime (OT) laws may be even more generous to employees in certain states.  For example, in California, employees earn OT for any hours worked over 8 in a work day and for their seventh consecutive day of work in a workweek.
  2. Employees CANNOT work off the clock. It’s OK to request that they get preauthorization before they work OT, but if they do work enough hours to be entitled to OT, they must be paid for it.
  3. In order to be exempt from OT, employees must fall into the Executive, Administrative, Learned Professional, Computer-Related, or Outside Sales classifications. These classifications come with specific requirements, which again, are subject to change based on President Obama’s decree to the DOL to update the regulations. The CURRENT exempt requirements are provided on the DOL Web site.
  4. Those who DO qualify as exempt must be paid at least $455 a week on a salary (not hourly) basis with a couple of exceptions. Computer-Related professionals may be paid at an hourly rate of at least $27.63 per hour ($40.38 per hour in California). The salary requirements also do not apply to those under the Outside Sales exemption.
  5. DO NOT let clients misclassify W-2 employees as 1099 Independent Contractors. This may seem like a good way to get around the FLSA overtime rules since independent contractors don’t earn overtime, but increased enforcement against the misclassification of workers has made this a treacherous proposition.  IRS back taxes are no longer the only risk. The DOL is now actively seeking back wages, and a number of state agencies are tacking on their own penalties and damages.

This article is for informational purposes only and should not be construed as legal advice.

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