One of the most important pieces of legislation pertaining to employment is the Fair Labor Standards Act (FLSA). It sets clear rules for child labor, overtime compensation, minimum wage, and recordkeeping.
The main goal of the FLSA is to ensure workers in the United States are protected against unfair pay practices. For employers to prevent expensive FLSA lawsuits and maintain a healthy work environment, companies must comply with laws and guidelines.
In this guide, we'll take a look at how businesses can overcome common obstacles and avoid penalties and consequences associated with the FLSA. We’ll also cover how the best GPS tracking apps like Timeero make compliance easier.
Important Notice for Employers: Significant changes to federal overtime rules were enacted on July 1, 2024. Among other changes, the salary threshold for overtime eligibility increased to $844 per week, meaning more employees now qualify for overtime pay. Review your employee classifications and payroll practices to ensure compliance and avoid costly penalties.
Prevent FLSA Lawsuits With a Precise Employee Time-Keeping System
What Are Common Mistakes Employers Make That Lead to FLSA Lawsuits?
Did you know that one in five small and medium-sized businesses are at risk of an employment-related lawsuit, which can cost them an average of $125,000? Let’s take a look at some common mistakes employers make that can land them in an FLSA lawsuit.
Misclassifying Employees
There are two types of employees recognized by the FLSA: exempt and nonexempt. Exempt workers are free from FLSA wage and overtime regulations, as the term implies. To determine whether a particular category of employees is exempt, the Act offers a number of potential exemption tests.
Instead of adhering to the particular exemption requirements, companies frequently assume that workers in particular job categories are exempt. As a result, there is a very high likelihood that they will misclassify workers and then deny them FLSA-guaranteed overtime and wages.
Poor Recordkeeping
When there is insufficient recordkeeping, it is difficult to cultivate a defense against allegations that cite violations of the FLSA. Recordkeeping mishaps may occur when time logs are not up to date or when employee breaks are not properly documented.
Employers should invest in reliable timekeeping systems and maintain thorough reports of all hours worked. This will guarantee compliance with the legislation's provisions on recordkeeping.
Off-the-Clock Work
FLSA lawsuits can result when employees are not paid for work done after hours, such as answering emails or accepting business calls.
The "continuous workday" rule, which was enacted by the Department of Labor Regulations, states that all of the time between an employee's first and last "principal activity" would be considered compensable working time. Therefore, engaging in these activities can be regarded as employees extending their compensable working hours by creating a "continuous workday."
Inaccurate Overtime Calculations and Bonuses
Non-exempt workers working more than 40 hours per week are entitled to one-and-a-half times their ordinary rate of pay. To calculate overtime compensation, an employer must first identify an employee's “regular rate of pay.” For hourly workers, this may seem easy.
However, many businesses forget that overtime compensation must include certain incentives like commissions and bonuses. Employers must follow the FLSA overtime laws and account for all relevant forms of pay, as well as unpaid overtime.
How Can Timeero Help You Avoid an FLSA Lawsuit?
Timeero is a great asset for any business, but how does it help you ensure compliance with the FLSA?
Accurate Time Tracking
As we mentioned above, one of the primary causes of FLSA lawsuits is the inaccurate recording of employee work hours. Timeero offers the best solution for this with its time-tracking feature, ensuring each hour worked is properly documented.
A timesheet entry on Timeero (admin view).
This includes not only the time an employee clocks in and out but also any breaks they take during the workday. For companies in California, using the California break sign-off tool ensures that staff members are adhering to the state's regulations for meal periods and rest breaks. With precise time records, employers can avoid disputes related to hours worked or time violations.
You can assign breaks for employees in California.
Overtime Calculations
Timeero accurately calculates overtime hours and rates for eligible employees by automating calculations based on FLSA guidelines. This feature saves employers time and effort by automatically determining overtime premiums for hours worked beyond the standard 40-hour workweek.
Setting overtime rules on Timeero.
Employers can set up overtime rules within Timeero's system. Other than creating specific rules for various users or groups, employees can also be assigned to different payrolls. Timeero allows you to set overtime thresholds for workers, and the software will notify the employees and admins when they reach their working limit.
Timeero sends out overtime changes.
This level of transparency and consistent data reporting fosters trust and fairness in the workplace and ensures FLSA overtime lawsuits are avoided.
GPS Tracking
Using Timeero's GPS tracking feature, employers can keep an eye on their employees' whereabouts while they're working. This feature is especially helpful for companies that employ remote or field-based employees who might not be under direct supervision.
GPS tracking ensures that workers are following assigned tasks and working in authorized areas by providing real-time visibility of their exact location. Employers can avoid possible allegations of unapproved off-the-clock work by confirming that workers are where they should be during working hours.
You can view each team member's location in real-time.
Mobile Accessibility
Employees can use the Timeero mobile app on their smartphones to clock in and out. The app is available for iOS and Android smartphones, enabling workers to record their work hours from any location.
The Timeero mobile app is easy to use.
Regardless of whether employees have an internet connection, the app records hours even when internet connection is lost. If you have some workers out in the field or on the road, this feature will come in handy.
Do you have employees who keep forgetting to clock in? The Timeero mobile app allows your staff members to enable clock-in and out reminders. Workers can select their workdays and the times they want to receive their notifications.
Detailed Reports
Timeero generates detailed reports of employee work hours, overtime, and attendance patterns, offering valuable insights for employers.
For instance, each timesheet provides information about hours worked, clock in and out times, locations reported, and breaks taken during this period. You don’t have to worry about employees not submitting their timesheets because it will happen automatically.
An employee timesheet on Timeero.
Timeero reports also function as supporting material for FLSA audits. They demonstrate adherence to wage and hour requirements while providing necessary documentation when defending against a lawsuit.
Employers can customize Timeero's reports to suit their specific needs. They can access reports by job, totals, user or group, date range, and mileage. There are also break reports and scheduled vs. hours worked reports.
Integration With Payroll Systems
Timeero's smooth integration with well-known payroll systems streamlines the transfer of attendance and time information needed for processing payroll. This ensures that payment calculations are precise and free from human errors.
Remember, failure to compensate your workers accurately is one of the top reasons you’d face an FLSA lawsuit. Timeero reduces the possibility of wage payment-related FLSA violations and payroll discrepancies by automating the transfer of employee time and attendance data to payroll systems.
Timeero integrations.
What Steps Can Employers Take to Ensure Compliance With the FLSA?
The first thing to keep in mind when avoiding an FLSA lawsuit is to be careful about how you implement its policies. There’s no room for mistakes, as every mistake can be costly.
Watch Out for Clocking In Early
If you have hourly employees or pay non-exempt employees a salary, these categories of workers should be paid for all hours worked in a week.
As straightforward as this rule may seem, many employers find themselves embroiled in litigation over not paying their employees what they deserve.
For example,an employee shows up to work 20 minutes earlier than scheduled to prepare for their shift. They may want to warm up their vehicle or load belongings, log into their business accounts, organize their workstation, or put on their uniform.
All these activities are work-related, and if an employee starts performing them before their shift starts, you’re under a legal obligation to compensate them for the time they spend getting ready for work. However, the FLSA doesn’t treat each of these activities in the same way - some are perceived as integral or indispensable principle activities while others aren’t.
This distinction makes a difference between whether you should allow your employees to clock in earlier regularly and compensate them accordingly.
In some cases, employees have to put on personal protective equipment (PPE) or safely remove it without contaminating their clothing or skin. Inspecting work equipment prior to starting a shift or conducting a security inspection afterward are other examples of activities that are essential to performing a job responsibly and efficiently.
There’s another fundamental distinction we should mention: preventing your employees from clocking in doesn’t mean the same as preventing them from working. Not allowing your employees to clock in early while they’re preparing for work won’t look good in court in case of a lawsuit. The same applies if you are asking them to clock out the moment their shift ends even though they still have work-related duties to complete.
So, how do you handle this issue and avoid an FLSA lawsuit?
Block Access to Company Premises
Blocking access to company premises, offices, equipment, or materials practically eliminates the odds that your employees will work off the clock. Even though this solution may appear drastic, it is better than allowing your employees to enter the building with clock-in restrictions.
Detect and Deter
Another solution to prevent FLSA lawsuits is to let your employees clock in when they start getting ready for their tasks and clock out once they finish all their responsibilities. While this means you’ll have to pay for the work they do outside their regular hours from time to time, it will put you in a position to react when you notice that an employee is abusing these relaxed clock-in/clock-out measures.
If you implement these measures, make sure to include the rules related to working off the clock and overtime pay in your internal Wage and Hour Policy. Use our California overtime law resource to help draw up your policy.
Understand the FLSA Timekeeping Requirements
The FLSA aims to protect employees from unlawful employer practices by establishing:
What a 40-hour workweek is
Minimum wage
Overtime pay
Recordkeeping
Child labor standards
All these provisions cover both full and part-time employees in the private sector and Federal, State, and local governments.
However, Wage and Hour laws are intricate, and compliance is often an issue. Although a company may have policies and systems in place, a supervisor or a manager can put the organization at risk for unpaid wages if they are not familiar with the FLSA timekeeping requirements.
There can be vagueness as to what constitutes compensable time. For instance, does an employee need to be paid for commuting to work?
Disclaimer: Determining when a worker is “off the clock” is not as easy as many employers may think. Using common sense or good faith and doing what “seems right” often leads to Wage and Hour violations.
Keep Accurate and Organized Records
Maintaining accurate records is the best thing a company can do to avoid an FLSA lawsuit. Producing such evidence will make it easier for you to defend yourself if an employee decides to press charges over unfair pay, overtime, or scheduling.
Aside from misclassification claims, most Fair Labor Standards Act lawsuits revolve around allegations that workers were not paid at the right rate for the time worked or not paid for all the time worked. Otherwise, it will be difficult to establish that disgruntled employees’ FLSA violation claims don’t hold up.
Create and Enforce Good Wage and Hour Policies
To avoid an FLSA lawsuit, your company should create and uniformly implement Wage and Hour policies that meet federal, state, and local requirements.
It’s important to have detailed wage and hour policies to prevent ambiguities that can be interpreted in different ways. Check out our free employee attendance policy and breaks policy templates to help you get started.
Before creating your policy, thoroughly research all Wage and Hour Laws in the states where you have employees.
An employee’s claim about a suspected FLSA violation will put your company on The Wage and Hour Division’s radar, although the agency also performs random audits. The WHD is part of the U.S. Department of Labor, and it conducts investigations to:
ensure that employers are keeping payroll and employment records properly
check if employee working hours are paid accurately
limit working hours and types of jobs for underage individuals
The FLSA permits WHD representatives to investigate and gather data concerning wages, hours, and other employment practices by entering employers’ premises, inspecting records, and interviewing employees. To avoid an FLSA lawsuit and potential legal complications, it’s critical to understand and closely follow relevant Wage and Hour Laws and conduct your own audits.
Since overtime policies differ from state to state, we created a useful resource where you can find what rules apply in your state or country.
Stay Up to Date with the FLSA Changes
Effective July 1st, 2024, the salary threshold for overtime eligibility has increased to $844 per week (or $43,888 annually). This means more of your employees may now be entitled to overtime pay if they work over 40 hours in a week.
The salary threshold will increase to $1,128 per week ($58,824 annually) on January 1, 2025.
Starting in 2027, the salary threshold will be automatically updated every three years to keep pace with changes in worker pay.
Being unaware of the latest regulatory changes won’t absolve you of the responsibility for a potential FLSA violation. To avoid an FLSA lawsuit, regularly check the Department of Labor's (DOL) webpage for relevant FLSA resources and guidelines.
Failure to comply with the updated overtime rules can result in costly penalties and legal disputes. Take action now to protect your business and ensure fair treatment of your employees.
Don’t Turn a Blind Eye to Working Off the Clock
Working off the clock refers to any work or duties performed by an employee that won’t be included in the employee’s weekly overtime hours and compensation.
FLSA requires that hourly and non-exempt workers receive overtime pay at a rate of no less than time and a half of their regular pay rate after 40 hours of work in a workweek. This means that failing to compensate your non-exempt or hourly employees who work more than 40 hours in a workweek according to legal requirements constitutes an overtime violation.
Sometimes organizations encourage managers to look the other way while employees work off the clock, and at times it’s just an oversight. Either way, your company is liable for a costly lawsuit. To reduce this risk, implement a time-tracking solution that will alert you in case an employee forgets to clock in or out while at work.
Seek Advice from an Expert
If you have any doubts about whether or not your organization is compliant with the FLSA, it’s best to seek counsel from a seasoned lawyer and ensure you have your affairs in order.
Remember that although the FLSA is roof legislation that overrides state laws, states outline many other provisions that aren’t included in this document. In some cases, state regulations have stricter requirements than the FLSA.
Use Timeero to Avoid an FLSA Lawsuit
It's clear that compliance with the Fair Labor Standards Act (FLSA) is crucial for employers to avoid costly legal battles. Understanding what is required of you is the first step to ensuring you are on the right side of the law.
With Timeero's innovative features and the comprehensive strategies discussed in this guide, employers can proactively mitigate the risk of Wage and Hour lawsuits. The software offers several features that not only help you ensure compliance but also make it easy to keep track of your employees.
Ensure Your Organization Is FLSA Compliant
Talk to our experts to discover how Timeero can help you avoid an FLSA lawsuit.
Emily Maina is a tech-savvy writer with a passion for creating content. With years of experience in the industry, she is well-versed in the latest trends and developments in the tech industry. When she’s not working, Emily enjoys exploring the great outdoors or watching her favorite shows.
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