Employers must pay for all hours worked, including unauthorized overtime, under the FLSA. You can discipline employees, but you cannot legally withhold pay for time worked.
Questions about overtime are among the most frequently asked of CEDR’s Solution Center team of HR Experts. For good reason, too. Overtime is the number one area where the Department of Labor (DOL) hopes to catch you messing up. Messing up overtime calculations by not including all sources of income is extremely easy to do, especially when you start adding in performance bonuses, differential pay rates, and commissions.
But the more important thing to recognize is that overtime and extra hours cost small businesses upwards of $6 billion annually in unplanned payroll expenses and legal risk. We’ve all been called in by our accountants and asked, “Do you realize how much overtime you’re paying?” Or, “It looks like your payroll percentage of profits is off; people are working too many hours.”
Under the Federal Labor Standards Act (FLSA), even if you warn an employee not to work more hours than authorized, both federal and state rules always require you to pay the time. There are no exceptions.
While this may seem like a reasonable approach to solving the issue, such a policy would also violate the FLSA, and it would be considered evidence against you in a legal dispute. So no, there is no legal way to withhold pay for hours worked, including overtime.
First and foremost, your employee handbook needs to have a policy that complies with state and federal wage laws and clearly outlines:
Based on this policy, address the issue immediately and document it in the employee’s file. CEDR members can place confidential notes and documents within an employee’s file using backstageHR.
If the employee continues to work unauthorized hours, create a written corrective action and require the employee to acknowledge it. Reiterate the policy and potential consequences again.
Stopping employees from clocking in may seem like a solution, but it’s a risky move. Some payroll companies may suggest disabling clock-in permissions once employees reach a limit, but this can trigger major issues.
In fact, this tactic has led to healthcare businesses being:
The safer and more compliant route is to proactively correct behavior. Monitor timecards daily. If an employee clocks unauthorized hours, address it immediately and escalate if needed.
CEDR members can use backstageHR to:
Since we are discussing overtime and pay, you may also want to check out this Two Minute Trainer that provides additional information on how bonuses and commissions factor into overtime calculations.
Friendly Disclaimer: This information is general in nature and is not intended to provide legal advice or replace individual guidance about a specific issue with an attorney or HR expert. The information on this page is general human resources guidance based on applicable local, state, and/or federal U.S. employment law that is believed to be current as of the date of publication. Note that CEDR is not a law firm, and as the law is always changing, you should consult with a qualified attorney or HR expert who is familiar with all of the facts of your situation before making a decision about any human resources or employment law matter.
A Blog Written by CEDR, written by HR Experts to help you run your practice.
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