If you’ve never had the pleasure of dealing with the Department of Labor, you are lucky. Consider the following true story.
When a Relationship Goes from Bad to Worse
Disgruntled employees. We’ve all had them; hell, I’ve been one a couple of times myself. It becomes troublesome when they leave and have an ax to grind. There are many ways an ex-employee can cause you angst:
- Internal Revenue Service: “They didn’t withhold my taxes”
- Equal Employment Opportunity Commission: “They discriminated against me because I was old (or young, or purple, or ugly, insert your own variable)”
- The Judge and Jury: “They sexually harassed me”
- Department of Labor “They didn’t pay me the right amount. I worked overtime”
The last one is the focus of this article.
How to Double the Cost of Your Ex-Employee
Recently we had a client who was investigated by the Department of Labor. I don’t know the reason why the employee left, but they were the only one in the business besides the owner. The ex-employee complained that they had worked full time, but had not been paid for all of their time. The employee had only worked part time, but the employer had neglected to keep any of the old time records, and hence couldn’t prove what the employee had worked. Result? $22,000 fine to the employer ( two years worth of back wages to full time). Ouch!
The Big Assumption
But wait, you say. I only have salaried employees. This is one of the areas of great confusion with small employers. Just because you pay an employee salary, doesn’t mean they aren’t eligible for over time. In general, any individual who is not an “exempt employee”, regardless of how they are compensated, are to be paid overtime for all time over 40 hours in a seven consecutive day time frame (Oklahoma and Federal law, but this varies by state).
So what is an exempt employee? It depends, but generally they have to be in a supervisory role and manage people. There are also exemptions for certain seasonal jobs. The real scary question is, if you had a salary person quit, can you prove they didn’t work over 40 hours. Our experience tells us that most business owners don’t track time for salary employees, simply because they don’t think they have to. Maybe they don’t have to, but it sure makes a lot of sense to!
The bottom line is that there are very few businesses (even those with only one employee) that shouldn’t be keeping time records for their employees. We have some great, inexpensive web based solutions, but whether you use a payroll service or not, make sure you are doing it right. It is very expensive to be wrong.
How long to I keep records: http://www.coregroupus.com/local/RecordRetentionGuidelines.pdf
What is an employee: http://www.coregroupus.com/local/Independent_Contractor_Checklist.pdf