Special Report — Complying with Wage and Hour Regulations

The SESCO Report July/August, 2022 (Part 2 of 3*)

Common Misconceptions and Compliance Issues

SESCO is available through a Professional Service Agreement or through a per diem fee to conduct a thorough Wage and Hour as well as HR and employment law audit. Contact SESCO to learn more about our Professional Service Agreement and services provided to clients in all industries across the country — [email protected] or 423-764-4127.

Calculating Overtime

Misconception 1: If an employee is taking more breaks than we allot by policy, we can deduct those additional breaks from their pay. An employer cannot make deductions from an employee's pay who take short breaks or who take more breaks than what policy allows if the breaks are less than 20 minutes. If an employee takes any break during the day regardless of policy that is less than 20 minutes, the employer is required to compensate the employee. Please note that the Fair Labor Standards Act does not require employers to provide break or meal periods.

Misconception 2: We must pay an employee based on their clocked hours even though they may clock in early or clock out late. An employer is not required to pay an employee should they arrive early, clock in and not perform any work until it is time. SESCO recommends to utilize the 7/8 rounding method as well as implement policy stating that employees who clock in early or late and do not perform any work will not be compensated. As labor costs are your largest controllable costs, it is critical that department heads/managers/HR professionals review all time records before processing payroll. Time records can be changed/altered to reflect actual time worked and SESCO recommends that both the manager/HR Director and employee sign off stating that true and accurate hours have been recorded.

Misconception 3: If a timecard states that the employee has been paid for 48 hours, we must ensure that overtime is paid based on their regular rate for these eight (8) hours of overtime. An employer must only pay overtime for actual hours worked in excess of 40 hours per week. For example, if an employee works 40 hours in a given workweek and is paid an additional eight (8) hours for a vacation day, no overtime is required to be paid on the eight (8) hours of non-working time, re: vacation day.

Misconception 4: We have to pay overtime for break times if an employee is at work over 40 hours in a workweek. Break times will not be considered hours worked if they satisfy the following:

  • The break is more than 20 minutes if it is a rest break or more than 30 minutes if it is a meal break.
  • The employee is completely relieved from duty; for example, a meal break is not spent answering phones, working at their desk, working at the computer, watching over a machine.
  • The employee is free to leave his or her work station.

Misconception 5: We do not have to pay an employee who works overtime, because it was not pre-approved. No, you must pay for all hours worked even if not pre-approved. The Wage-Hour Investigator will deem that the business benefited from the employee's work and that you knew or should have known that they were performing work. However, SESCO suggests a very strong, direct policy in the employee handbook discussing overtime and not working overtime unless approved. Further, disciplinary action is the most efficient way to address these types of issues.

Misconception 6: We have an exempt employee who works less than 40 hours per week; however, because they are exempt, we must guarantee the salary basis of $684 per week. The only requirement for compensation, even if the exempt employee works less than 40 hours, is to pay at least minimum wage. You do not have to pay the position the $684 per week. However, if the position works more than 40 hours per week, to avoid non-compliance, you must guarantee them the $684 per week to avoid overtime payments.

Misconception 7: Some of our employees work 24-hour shifts. They may not work all 24 hours as we do give them time to sleep and eat. However, because we require them to be at our place of business, we must pay them for 24 hours. Sleep time and meal periods will not be considered hours worked if they satisfy the following:

  • The employee is on duty 24 hours or more
  • The employee and the employer agree to exclude from work hours bona fide meal periods and a bona fide, regularly scheduled sleeping period of not more than eight (8) hours.
  • The employer provides adequate sleeping facilities and employees usually can enjoy uninterrupted sleep period.
  • Should a sleep period be interrupted and the employee is awakened and asked to perform work, that time is counted as work. If the employee gets five (5) hours of sleep, the entire sleep period of eight (8) hours can go unpaid.

*Tune-in next week for Part 3 of 3