Small Business Today Magazine MAR 2015 IMPACT STONE DESIGN | Page 40

EDITORIALFEATURE

Overtime Issues and Salaried Employees –

Do You Have a Problem? 
By Paul J. Franzetti

T

he number of overtime lawsuits has
sharply increased in Texas in the last
decade.  That employees are seeking
greater compensation should come
as no surprise, given the overall stagnation in take-home pay since the 1980s. 
But why should you as an employer care? 
After all, you are paying market rates for
wages and you may believe that relations
with your employees are so good that no
one would think of suing.

Many employers may be taken off-guard
regarding:  

•      The complexity of the Fair Labor
Standards Act (FLSA) and regulations regarding overtime.
•   The detail of recordkeeping required by the FLSA.
•    How easy it is to violate the FLSA.
•    The availability of collective actions
for all affected employees.
•     The recoverability of attorney’s
fees by successful plaintiffs.
The severity is compounded by how
quickly damages can multiply even for minor violations and all it takes is one disgruntled employee to start the ball rolling. 
The basic rule under the FLSA, payment
of 1½ times the normal hourly rate for
all hours worked over 40 during a week,
seems simple enough, but it isn’t. 

3. An employee works 50 hours one
week and you tell them to work
30 hours the following week.
4.      An employee reports to a jobsite
but is not paid for work until you
give them a particular project to
work on.

The illustrative answers by numbered line are:
1. Compensable.  You may be able to
take disciplinary action but overtime is owed.
2. Most likely compensable.  The real
issue is the system for tracking
employee time in this regard.
3.     The extra 10 hours in the 50-hour
week is compensable overtime. 
Comp time is legal in the public
sector, not the private sector.
4. The wait time is possibly compensable if it and the time worked on
the project are greater than 40
hours in a week.

Consider whether the overtime rule applies
in the following situations:

These answers are not meant as legal
advice but only as illustrations in an overview of complex issues and the reader
should not rely on them in any way to
make decisions about their situation.  Different circumstances pertaining to these
and seemingly similar situations may result
in different answers.

2. An employee answers phone calls
or responds to email or other social media outside normal working hours.

Many small businesses try to avoid overtime issues by paying all employees a salary with occasional bonuses paid for extra
time on special projects.  The FLSA overtime requirements, however, have nothing
to do with whether the employee is paid
on a salaried or hourly basis.  Instead, the

1.    An employee works more than
40 hours a week even though you
have told them not to do so.

38 SMALL BUSINESS TODAY MAGAZINE [ MARCH 2015 ]

overtime provisions apply to ALL employees unless an exemption applies; thus the
references to “exempt” and “non-exempt”
employees.  The exemptions from the
overtime requirements generally apply
only to executive employees and managerial employees. The burden of proving that
an exemption applies, moreover, is on the
employer. 
If a non-exempt employee is paid a salary and works more than 40 hours in a
week, the overtime rate is generally calculated by dividing the regular weekly salary
by the hours normally worked per week
(40 or fewer) and applying the 1½ times
rate to the portion worked over 40 hours. 
In addition, the “salary” rate could include
bonuses paid for additional work that are
not properly segregated for the overtime
portion which could actually work against
an employer who thinks H܈