Small Business Startup News

Paying Employees For Work Breaks

Written by Tim Morral
Published: 1/7/2016

You have to pay your employees for time they spend on break. If not, and you are like this company, you might end up owing $1.75 million in back wages.

The Fair Labor Standards Act (FLSA) is not a law to be trifled with. That was a lesson learned the hard way recently by American Future Systems, doing business as Progressive Business Publications.

Systematically Underpaying Workers

Owner Edward Satell didn't think he had to pay his workers for the time they spent on break. His line of thinking was that his telemarketing employees should only be paid for their productive time when they were actually making sales calls.

Unfortunately, that's not what the FLSA says.

Yes, employers don't have to offer employees breaks, but when they do, the FLSA states that any short breaks (e.g. 5 to 20 minutes in length) are considered compensable work hours that must paid for and must be used when calculating overtime pay.

In the case of Progressive Business Publications, they docked employee pay for break time, and, in doing so, ran into a slew of problems. First, they weren't paying the right wage and were systematically underpaying employees. Second, their hourly wage sometimes dipped below the federal minimum wage. Third and finally, they weren't paying overtime wages correctly.

In the end, a judge found the company liable for back wages. On top of that, the company had to pay the same amount in liquidated damages. All total, for over 6,000 employees, this particular company found itself owing in the ballpark of $1.75 million.

This liability was even larger than it could have been because the company fought the accusations for over two years, failing to be compliant with the FLSA in the interim.

FLSA Basics

We've got no sympathy for Edward Satell and his woes. Employers must understand the basics of employment law. It's fairly easy to understand what's required of you as an employer and you can always call the Department of Labor's Wage and Hour Division at 866-4US-WAGE (487-9243) to ask questions about federal wage laws and your obligations as an employer.

At minimum, every business owner should understand a few fundamental requirements that come out of the FLSA. In a nutshell:

  • The FLSA requires that covered, nonexempt employees be paid at least the minimum wage of $7.25 per hour for all hours worked.
  • Covered, nonexempt employees also must be paid time and one-half their regular rates, including commissions, bonuses and incentive pay, for hours worked beyond 40 per week.
  • Employers also must maintain accurate time and payroll records.
  • Employers who violate the law are liable to employees for their back wages and an equal amount in liquidated damages. Both back wages and liquidated damages are paid directly to the affected employees.

The bottomline? Employees are your most valuable asset and you need to do right by them. Profits can't come at the unreasonable expense of employees or as a result of your breaking the law. If that's your business model, it's time to find another way to make a living.

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