With much attention being given to a recent increase in the federal minimum wage, its "ripple effect" and impact on the cost of doing business, now is an opportune time to alert accountants and independent businesses to some of the pitfalls that can be the basis for unpleasant, time-consuming and costly confrontations with agents of the Federal Wage-Hour Division.
On the surface, wage-hour requirements appear to be simple and uncomplicated. However, audits conducted by U.S. Department of Labor (DOL) investigators indicate otherwise as businesses throughout the U.S. have to pay about $150 million in back pay each year for violating minimum wage and overtime standards.
Since a disproportionate amount of violations involve small business owners, the question may be raised as to whether independent businesses set out to evade the minimum wage and overtime standards. The answer is a resounding "NO."
Why, then, do many independent businesses find themselves confronted with thousands of dollars in assessments when their businesses come "under the gun" of an audit by a U.S. DOL investigator? Unfortunately, too many business concerns are too complacent and not familiar with the very strict requirements placed upon their employment practices in the wage-hour area.
Failure of an employer to realize what constitutes compensable hours of work and the misclassification of salaried employees as managerial employees account for the vast majority of problems upon an audit by the U.S. Department of Labor.
As one probably realizes, it is a rare exception to find employees appearing on payroll records at rates less than the legal minimum. Although pay records may indicate all employees being paid at the legal minimum, substantial violations can still exist because an employer doesn't pay for all the hours that may be viewed as compensable by a DOL investigator.
Compensable Hours of Work
To avoid unneccesary assessments, an independent business should be aware of the following activities that are viewed as compensable hours under wage-hour regulations.
* Duties undertaken by
employees each day to prepare or
"get ready" their work area
prior to scheduled starting
time. * Work performed by
employees who eat at a desk and
answer the phone or perform
other duties while eating
lunch. * Work done by employees who
stay on beyond their regular
scheduled quitting time to
take care of paperwork. * Attendance at meetings
scheduled during an employee's