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Don’t Let Overtime Be Your Kryptonite: 5 Ways Companies Get Their Policies Wrong

May 12, 2022 - minute read

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By Anna Pajor

Many companies still work overtime to try to deal with overtime challenges, but that’s nothing new. It has been this way for generations.

In fact, overtime law in this country dates all the way back to 1938! 

The Fair Labor Standards Act of 1938 established that nonexempt employees had to be paid overtime rates for any hours worked above 40 during the course of a workweek (although it started at 44 hours with a minimum wage set at a shiny quarter per hour). The overtime salary threshold was established at $1,560 per year (which is about $32,000 in today’s dollars.)

The world was filled with uncertainty back then, even though the official start of World War II was still a year away. It’s no wonder that was the year that Superman debuted in Action Comics. People were looking for a hero who could help protect them. 

Blue-collar workers in particular were looking for a champion of their own to protect them from working long hours for minimal pay.  

With the rise of unions in the 1920s and 1930s, it’s not surprising that strikes were common in that period. There were more than 2,700 strikes in 1938 involving more than 688,000 workers leading to 9 million “man days” of idleness. For comparison, there were a little less than 81,000 people involved in strikes in 2021 vs. 27,000 in 2020, although COVID-19 likely factored into that low number. In 2018, there were more than 485,000 workers involved in strikes, which was the highest number we’d seen since 1986. 

While overtime certainly isn’t the only reason workers strike, it does factor into the equation in some cases.

Understanding Overtime Rules

As you can imagine the overtime rules have changed many times since they were introduced more than 80 years ago.

So what does the FLSA say about overtime? It states that:

  • Nonexempt employees must receive overtime pay for hours worked over the 40-hour workweek. (Reminder, be sure to perform FLSA testing to ensure proper classification of exempt and nonexempt workers. Also, be sure you classify employees and contractors correctly. 
  • Pay for overtime must be no less than 1.5 times the regular rate of pay.
  • There are no limits to the number of hours employees 16 and older can work during a workweek. Some state laws, however, give employees more rights than the FLSA does, so check with your state department of employment or labor to be sure. (For example, Illinois has the One Day Rest in Seven Act.
  • Overtime pay is not required on weekends or holidays unless overtime is worked on those days. Overtime pay earned in a particular workweek must be paid on the regular payday for the pay period in which the wages were earned.  It cannot roll over as hours into the next work week.  

Even so, after all these years, companies are still getting overtime wrong. Here are some of the common mistakes we see.

5 Ways Companies Get Overtime Policies and Procedures Wrong

  1. Mandatory Overtime: Companies are allowed to require employees to work overtime. There’s no question about that—but blue-collar workers who “perform work involving repetitive operations with their hands, physical skill and energy” are considered nonexempt and must be paid overtime wages. Examples include mechanics, iron workers and construction workers, according to the U.S. Labor Department.
  2. Penalties Add Up: Not paying workers overtime when they should be paid overtime can be costly. In fiscal year 2021—which began Oct. 1, 2020 for the federal government—the U.S. Labor Department found more than 7,100 overtime violations leading to more than $138 million in back wages paid to 145,000 workers, which was down from fiscal year 2020 when there were 8,200 violations leading to $151 million for 169,000 workers. Additionally, according to law firm Seyfarth Shaw’s 2021 class-action litigation report, plaintiffs won about 84% of wage and hour lawsuits in 2020 (231 of 274 cases) and a half of the decertification rulings (six out of 12 cases).
  3. Don’t Discriminate: Who you decide to ask to work overtime and who you keep from working overtime is important. Title VII says that you cannot discriminate based on race, color, religion, sex, national origin, age, or disability. In terms of overtime, you need to be consistent in your policymaking. While one recent overtime discrimination lawsuit worked out in the employer’s favor, legal bills still add up.
  4. Dependency Can Be Detrimental: In some organizations, employees who are given the opportunity to work overtime do just that, and they count on that extra income. Should the business need change, it’s possible those workers who count on extra money from working overtime could wind up in financial trouble if they can no longer count on those extra funds. We’re not saying that allowing workers to make extra money is a bad thing, but just make sure they understand that it’s not a guaranteed option forever. Additionally, as the Society for Human Resource Management (SHRM) reports, working long shifts can be a safety issue. When workers are fatigued, they’re more likely to make mistakes that could lead to incidents—and added liability for the company.  
  5. More Can Be Less: As the Great Resignation continues and the talent pool gets shallower and shallower, some companies are turning to overtime for their current employees to fill the void. Having people work longer hours can lead to stress, fatigue  and burnout, and eventually could force your best workers to look for employment opportunities elsewhere. One solution would be to bring in contingent workers until you can find permanent hires to maintain productivity and not overstress your staff. 

Handling overtime is a full-time job, but, done right, it can also be an effective way to meet your productivity goals.

Implementing a workforce management solution that allows you to manage budget, scheduling, overtime and more takes the pressure off so you don’t have to continue working overtime to deal with your overtime headaches. 

Also, handling overtime properly is a big part of avoiding fines and lawsuits while helping to retain your best workers. If you’re doing overtime wrong, it could be one of the reasons your workers might want to go up, up and away, to bother a catchphrase from Superman. After all, even the Man of Steel, sorry, we mean Clark Kent, quit once. So don’t let overtime policy be your Kryptonite!

Want to look over your overtime policies? Schedule a complimentary 30-minute HR compliance review with me today.Let's take your overtime policies up, up and away together!