So you want to be an employer?
Treaty Oak ELG offers a flat rate First Time Employer package that can jumpstart any employer’s compliance standards. Even with all the right forms, however, there is a lot to learn when you hire your first employee. You can be guaranteed that you will make some mistakes but with a little bit of help, you may avoid some of the bigger and scarier regulatory issues. The remainder of this article addresses a few of the most common mistakes.
Salaried and Hourly Has Nothing to do with Job Titles
FLSA and state regulations determine whether an employee is exempt from receiving overtime pay, not whether they earn a salary. Just simply calling an employee ‘exempt’ or ‘salaried’ or ‘full-time’ does not mean that an employee is exempt from overtime pay, but the criteria under the FLSA, DOL, and the Texas state law for overtime pay does. Employers cannot just give an employee a job title that sounds like a salaried position and then not pay that employee overtime unless they are actually completing the responsibilities and duties of the job. For example, giving a sales clerk a grandiose job title like ‘Director of Communications’ does not mean that the sales clerk is lawfully exempt from overtime pay.
The job roles the FLSA recognizes as exempt from overtime pay fall within broad categories including professional, outside sales, executive, STEM (science, technology, engineering & mathematics) and administrative positions. However, under the DOL (Department of Labor), they must meet job requirements through employment testing. The DOL focuses on how an employee does the job and the nature of the job itself.
According to the FLSA, the criteria for exemption from overtime pay requirements as of January 1, 2020, include:
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Employees must be paid a salary.
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Employees must be paid at least $684 per week or $35,568 per year. (This is an increase from $455 per week and $23,660 annually.)
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Employees must be paid a salary for any week they have worked.
An hourly employee, also referred to as a non-exempt employee, is entitled to time and a half for hours worked over 40.
Beyond the above FLSA criteria, employers must also meet DOL’s specific requirements for executive, administrative, professional, any employee that receives over $107,432 or higher, computer or STEM position and outside sales job roles in order for those positions to be exempt from overtime pay. Employers can meet the standard salary for any position by offering bonuses or incentives like a commission in lieu of 10 percent of their salary.
Employers Must Pay Employees Every 2 weeks or twice a month
Under the Texas Payday Law, hourly or non-exempt must be paid twice a month. Both state and federal laws leave it to the employee and employer to determine a fair and equitable pay rate. However, it is the employer’s responsibility to maintain pay methods and pay rates according to a wage agreement which can either be written or verbal. Since the employer dictates how the agreement is determined and is responsible for expressing their intent in hiring the employee, any ambiguity within the wage agreement is generally resolved against the employer. So, be careful who you talk about pay with employees.
Being Generous with Flex Time Can Lead to Trouble with Overtime Laws
Flextime is great for employees who need varied arrival and departure times due to family or other obligations as long as they are available within a daily ‘core’ time and work the agreed number of hours per week. Where employers often find themselves in hot water is when a non-exempt or hourly employee is not privy in advance to a compensatory time policy or a wage agreement that states they agree that time off is given in lieu of cash. If no agreement is made between employer and employer, compensatory time off, comp time, or flex time cannot be used by the employer. Also, employers who use flex time or comp time for non-exempt employees must ensure that work schedules (early or late arrivals and departures) are adjusted within the same two-week pay period so that the hours worked do not exceed 40.
Salaried and Hourly Has Nothing to do with Exemption from Overtime Pay
Another misconception made by employers is that paying a ‘fixed’ salary to a non-exempt employee makes them ineligible for overtime. Paying an employee a salary does not cover both straight time and overtime. It does not matter how much an employee is being paid to do their job or if the employee agrees that the salary covers both overtime and straight time. The DOL and the courts will rule that overtime pay is still owed to that employee.
Every Employee Must Have a Time Record File
Employers must follow the FLSA’s strict recordkeeping requirements. Detailed records of hours worked must be kept for every non-exempt or hourly employee. This is in the event of a wage claim filed by an employee for unpaid overtime. Maintaining pay records can dispute the wage claim file when used against the employee’s own time records. Without records, the courts and the DOL accept the employee’s own timekeeping record under the ‘best evidence’ rule. Also, the employer risks an audit by the DOL for failing to comply with FLSA’s recordkeeping requirements.
These rules really only scratch the surface and there are some clever ways to adhere to the rules while still creating sensical payment techniques. Reach out to Treaty Oak ELG if we can help you sort through these issues.
