You're About To Be Hit With An FLSA Overtime Lawsuit

06/17/2016 01:34 pm ET Updated Dec 06, 2017

There's a reason people use the word "navigating" when they talk about government regulations and FLSA compliance. Avoiding potential hazards just beneath the surface, making sure everyone is on board and accounted for, and staying on course (and afloat) when unexpected obstacles arise feels a lot like guiding a boat through uncharted water.

And of course, it's not just any boat. It's your livelihood, your employees' livelihoods, your plans for the future, and your contribution to the world.

If you know me at all, you know how I feel about regulations and policies--we'll just say they're not my favorite topic of conversation. But good, bad or indifferent (I don't know many people in this last camp), the new overtime regulations that will kick in on December 1, 2016 are being called "the most significant change to the economy in a decade." About 4.2 million workers will now qualify for overtime in a little less than six months. Not to mention the 8.9 million workers who are currently misclassified. Meaning, there's some choppy waters ahead.

Six months isn't much time to prepare, and as a business owner myself, I know how hard it is to prioritize everything jockeying for prioritization on your to-do list. Understanding the implications of the FLSA, including the new rulings, has weighed heavily on my mind. Not just for myself, but for the 30 million other small business owners in the United States--20,000 of which are my own customers.

With that in mind, I turned to my team at TSheets, and some of the nation's leading FLSA experts to answer the questions that business owners (including myself) need answered right now. "What are my options?" "How can I prepare?" and "Where am I at risk?"

This is what they had to say.

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The Golden Triangle
When I spoke with Maria O. Hart, a wage and dispute attorney specializing in employment law with Parsons Behle and Latimer (and a fellow Idahoan), she said,

"Policies, procedures, and the law are the golden triangle when it comes to preparing for a change like the new FLSA overtime regulations. Neglect one area, and you open the door to lawsuits. Give all three the proper attention they deserve, and you're going to be in pretty good shape."

I (like many of you) bristle at the words "policy" and "procedure." Strict office dress codes, a long list of "don'ts," and a buttoned-up corporate office environment jump to mind. But as Maria (and the two other FLSA experts we consulted with) explain below, that's not the kind of policy we're talking about.

Know the Law and Watch the Courts
According to Daniel Abrahams, partner with Brown Rudnik LLP and author of The Employer's Guide to the Fair Labor Standards Act,

"Even very savvy companies with significant HR resources end up with wage and hours lawsuits on their hands. Most wage and hours violations aren't willful, and it's not that kind of thing that happens only to 'bad employers'."

In other words, don't think that just because your employees seem happy and enjoy coming to work, that you're not at risk here, especially with the new rulings on the horizon.

Maria added, "Whether you've dealt with a wage and hours suit in the past or not, preparation is crucial. It's impossible to say how much of an increase we'll see in FLSA suits with the new overtime regulations in December, but you can safely assume that with at least 4.2 million workers suddenly eligible for overtime, and the upward trend in wage and hours suits we've seen over the past 15 years, employers need to take this seriously. The time and expense involved in these suits can be enormous."

When it comes to the new overtime regulations, here are the basics of what you need to know, in plain English:

The new overtime ruling in three sentences: Prior to December 1, 2016, if an employee is classified as "exempt" and earns more than $23,660 annually, he or she doesn't qualify for overtime pay. After December 1, 2016, that threshold increases to $47,476, with additional increases scheduled every three years. According to the Department of Labor, the new rule is intended to correct misclassifications, improve employees' work/life balance, and raise the salary threshold above the poverty level.

Like most rulings, there's room for interpretation, and a number of options for applying the new regulations to your business. Daniel said, "There are quite a few resources for employers to understand how the new regulations apply to their situation. The most important thing is to dedicate the time and resources to monitor how the changes will impact your business--on an ongoing basis. Ignorance isn't a defense when it comes to potential lawsuits."

However, he also cautioned,

"The FLSA's wage and hours provisions are a complicated, shifting target. And the law is being reinterpreted in new ways all the time through court rulings, making it very difficult to stay on top of every nuance in real time. Make sure your HR team has an ear to the ground when it comes to pivotal court cases in your industry, and enlist legal counsel to help you stay abreast of changes that may impact you."

In other words, don't try to go this alone. The sheer volume and complexity of the FLSA is staggering--and the nuances involved in the way it applies to your business make it critical that you have HR on point, and a legal expert in your corner.

Create and Enforce Good Policies
According to Maria, the second arm of the golden triangle is creating--and then uniformly enforcing--good policies that meet federal, state, and local requirements when it comes to wage and hours matters in your business. We're not talking about what I like to call "personality policies"--policies based on the preferences of the business owner. These are policies that ensure you're staying compliant with the law.

Maria stressed that it's critical to have wage and hours policies that are comprehensive--and outline expectations and guidelines concerning shift standards, comp. time, general business hours, timekeeping expectations, the process for approving overtime, the consequences for unauthorized overtime, and any other issues that govern how employees are paid and what the company expects of its workforce when it comes to hours.

Think you already have a pretty good policy in place when it comes to wage and hours matters? I hope so, but don't be too quick to mark that box as checked.

"Many business owners are surprised--even horrified--to read what their actual policy states when they're forced to confront it in a pending wage and hours suit,"

said Lee Schreter, co-chair of Littler Mendelson's Wage and Hours Practice Group. "Make sure you know what your company policies actually say, and review and update them quarterly."

If your policies need an overhaul, the good news is that with a little legwork, you can do a lot of the work yourself. Resources like SHRM.org has excellent resources for business owners who want to beef up or create a functional, comprehensive policy on wage and hours matters.

Maria said, "It actually saves me time--and business owners money--if they create a draft of a policy before I review it. Taking an active role in policy creation also helps business owners make sure they know what's in that policy."

And just as important as creating a policy in the first place is enforcing it. Maria adds, "Even the most comprehensive, well-drafted policy isn't going to protect your business if you're enforcing it willy nilly. If you're only enforcing your policy when it's convenient, you're opening the door to claims of discrimination."

One of the hallmarks of a good policy that's being enforced is a company that has regular touch points in place to train employees and touch base on the policy. Maria said, "You need to be having ongoing discussions with your managers and employees. If the only time your employees really hear about your policy is during onboarding, there's a problem."

Implement Smart Procedures
With smart policies in place and a watchful eye on the law and ongoing developments in the courts, implementing smart procedures is the final--but no less critical--component of keeping your company in good shape.

When is the right time to start? Right now. Maria said, "Now is the ideal time to create smart procedures that protect you down the line." Some incur a small cost, others are free--they just take effort and consistency. These are the most important things you should be doing--right now--to protect your company from potential lawsuits, and avoid having things go from bad to worse if a lawsuit does land at your doorstep:

  1. Automate. This is especially important when it comes to employee hours. Spreadsheets and paper are notoriously ridden with human error, and have the tendency to get lost or buried. Automation of employee hours through mobile time tracking apps not only gives you a real-time, accurate view on employee hours (so you can address problems as they happen), but it gives you a paperless paper trail in the event of a dispute or suit. Mobile time tracking also gives you useful tools like overtime alerts, eliminating statements like, "I didn't realized I'd gone over my hours by that much."

  • Empower Managers. Empower managers to follow through with the guidelines laid out in your policy when it comes to disciplinary action for violations. Emphasize the importance of implementing the policy for everyone, not just on a case by case basis. Daniel said,
  • "When it comes to wage and hours suits, I like to say 'no good deed goes unpunished.' So often you have a manager who thinks he's doing an employee a favor by letting something slide, only to have that come back around in the form of a suit from another employee."

  • Schedule Annual Reviews with HR. Having a standing annual review in place with HR is a great way to make sure employees and managers are aware of policies and procedures.
  • Review Classifications and Job Descriptions Annually. Job descriptions and classification can change over time. Being proactive and making sure your job descriptions align with actual job duties, and that employees are classified correctly, can be just the ounce of prevention you need to avoid a lawsuit.
  • It's a lot of work upfront to create and enforce policies and procedures that protect your business, not to mention staying informed of changes that affect your business when it comes wage and hours matters in the FLSA. Ultimately, how you decide to apply the information in this article is up to you, but arming yourself with that information is the first step toward choosing how to guide your business through potentially rough water.

    Like it or not, in today's business world, thoughtful--and sometimes creative--navigation of regulations like these is the price of smooth sailing.