A human resources executive recently contacted me about an administrative assistant, two of her techs, and a recruiter who all want to be
salaried — claiming they wanted the same freedom as the professionals in the
organization enjoy.
She was aware she was
on shaky legal ground but wondered if she’d be taking a big risk by paying all
of them salary with no overtime?
You hear a lot of announcements about a government crackdown
on small employers who agree to do exactly as her employees were requesting. I
won't lie. Given the gigantic number of small businesses compared to the tiny
budget of the state government, the chances of being audited aren't that great.
But a government audit is not the only big financial risk
you take when you pay your staff salaries when they're supposed to be paid
hourly. It's the problem of the disgruntled employee who has asked and agreed
to be paid salary with no overtime who's the big risk.
This hit home for two Silicon Valley employers in the last
few months:
- One employer of four people was forced to pay a
$60,000 judgment
- Another ten-person employer had to pay a claim
for over $70,000— and eight identically treated employees are in line to make
the same claim!
It's a small sample but claims like this are being made more
regularly and occur much more often than government audits.
The problem with these wage claims is that the
"agreement" to be paid a salary instead of an hourly wage with overtime
is invalid. It gets worse.
Once you have entered into an agreement not to pay overtime
you probably don't keep track of the hours that your salaried people are
working. If the arrangement goes sour your employee does not have to have proof
of the exact number of hours of overtime they worked — it's on you to show the
exact hours, breaks and lunch times of all of your employees who are legally
entitled to overtime.
Put aside all of the legal benefits that come from correctly
paying your staff and you'll see that by paying employees hourly your could
reap other large savings besides avoiding litigation.
Some significantly undervalued benefits of hourly scheduling
are
- If you as management are required to structure
each employee's work into an eight hour day, you find that people can be much
more productive — not just the hourly workers but you too!
- You will be in control of how much overtime
people are allowed to work. For instance, you can have a policy that does not
permit overtime unless the employee has received authorization for overtime in
advance of it being worked. You can enforce this by disciplining employees who
work overtime with without seeking approval in advance.
- You can reduce the amount of overtime payments
by hiring part-time or supplemental staff to fill in when there are extra
assignments that need to be done.
- You can look to hire crackerjack employees who
want to work an eight-hour day. These people want to have the consistency of
knowing they can devote their outside hours to their personal life. Often you
will find these are terrifically motivated people who get things done more
efficiently.
Finally when you pay people according to the law you
increase all of the employees’ confidence that you will treat them fairly in
other employment decisions.
