Track all hours worked just in case exempt status fails — Business Management Daily: Free Reports on Human Resources, Employment Law, Office Management, Office Communication, Office Technology and Small Business Tax Business Management Daily

Track all hours worked just in case exempt status fails

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The Fair Labor Standards Act (FLSA) requires employers to pay hourly employees time-and-a-half for every hour worked in excess of 40 hours per week. But exempt employees are paid the same salary no matter how many hours they work. Thus, many employers assume they don’t need to keep track of the hours exempt employees actually work.

Wrong! Since it’s conceivable that employees could contest their exempt status, you should track all hours worked by all employees.

If you made an error and an employee is later found to be nonexempt, you’ll have to figure out how much back pay you owe. If you don’t know how many hours the employee worked, you’re stuck with his or her (likely inflated) figures.

Plus, the employee will want to calculate overtime based on salary divided by 40. If you have accurate figures, you can divide salary by the actual hours worked. The total tab will probably be less (see box below).

Recent case: Enrique Torres worked for Bacardi and claimed he was wrongly classified as exempt. He sued and the court said it would let a jury decide.

However, because Bacardi kept accurate records of its employees’ work hours, the court allowed the company to calculate what it owed in overtime by dividing Torres’ salary by the actual hours he worked per week rather than by 40. Then, for each week, the overtime due equaled half the hourly rate times the number of hours in excess of 40 worked that week. (Torres v. Bacardi Global Brands, No. 06-20689, SD FL, 2007) 

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