Human Resources News & Insights

5 common OT mistakes getting HR in trouble

Figuring out which employees do and don’t need to be paid overtime is one of HR’s most confusing tasks. Here are some common slipups the Department of Labor is looking for.

These are big OT mistakes made by many employers, according to labor law attorney Micheal Lorenger:

  1. Making all salaried employees exempt — Even if you don’t pay workers an hourly wage, they’re owed overtime if they don’t meet one of the FLSA’s specific exemptions. Most of the exemptions require employees to be paid a salary, but that’s only one test out of several.
  2. Improperly deducting from a salaried employee’s pay — For employees to pass the salary test under the FLSA, the company can’t deduct their pay based on quality or quantity of work (except when an employee misses an entire day), or for lost or damaged equipment. Companies can still make workers pay for equipment they damage — you just can’t take the amount directly out of someone’s paycheck.
  3. Misclassifying assistant managers — In most cases, managers are exempt from OT — but don’t make the mistake of lumping assistant managers in with them just because of their title. The key is the amount of authority the assistant has. In big departments, they might have the power to make their own decisions regularly. In other cases, the assistant’s job might just be to make sure the manager’s decisions get carried out.
  4. Misinterpreting the “administrative” exemption — Though the same terminology is used, the administrative OT exemption has nothing to do with administrative assistants. In fact, most admins do not qualify for an exemption. The administrative exemption refers to people involved in general business operation who use “discretion and independent judgment” in their work.
  5. Not correcting previous mistakes — If a company realizes an exemption was misapplied, many companies do nothing and hope no one notices. That’s the easiest option in the short term — but it’s also the easiest way to end up in court fighting a claim for back pay.
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  • Angel M

    Another biggie some companies use is putting a big name job title just to avoid paying OT. Having an office clerk’s job title be “Office Manager” doesnt make him/her exempt.

  • Mary

    I have a question, I hope someone can answer … All our office employees are “salary” but throughout the year earn sick/personel day at 1/2 per month. Obviously that works out to 6 day and one extra is given and it is suggested that the day be used after Thanksgiving. My question is this, do I list their pay as “Daily” so that when they do take a sick/personel day off I can keep track of it? Can a salary employee be listed as a “daily” employee? Hopefully that makes sense to someone!!!!!!!

  • B Smith

    Our headache seems to be classifying our Foreman who “manage” their employees but also must work hands on beside their employees most of the day in our modular home manufacturing plant. They can interview applicant’s but do not have the final say in when to hire or who to hire. They can not fire an employee without their manager’s approval. They receive a set salary each week no matter how many hours are worked and must use a vacation day if they are not at work. No written agreement. Would you call them exempt or non exempt?

  • Jenn B

    I’ve seen alot of discussion regarding companies intentionally misclassifying employees in order to avoid paying OT. However, I’ve not seen any discussion about companies who intentionally classify managers as “non exempt” so they CAN get paid overtime. I’ve tried other HR resources but haven’t seen this addressed – has anyone dealt with this before and is this a violation of FLSA?

  • Bob Acre

    There is a little known exception on the Point #2 above. Instructors’ (Elementary through College/University) pay can be deducted for time missed for any reason. There is a recent DOL Opinion Letter to that effect and was confirmed by our Regional DOL office. For more information contact your Regional DOL office. Again, this applies to individuals who are Intructors/Educational Setting…

  • Sarah

    B Smith: your Foreman should be non-exempt. Just because he makes more and the OT pay would be outrageous is not an excuse to misclassify him. He deserves OT pay.

  • Suzie

    We have an exempt employee in a 40 hour work week. This is a desk job, there are days he works over 8 hours and leaves early days to make up for the time spent over. The problem is that when we are short handed the boss instructs him to fill in, which is a completely different job classification with a different payscale. Sometimes it does entail working over the 8 hours. He is allowed to sit at his desk and continue to do his normal job duties until a call comes in and he needs to respond in the fire engine. He does not get any pay differential or even overtime, which I disagree with. My responsibilities as the Office Manager is to ensure that we are follwoing all FLSA regulations. I have approached the decision makers and their response is that this person is exempt. Am I wrong to consider this be paid at two different payscales (weighted) and look at paying any overtime for work performed over 8 hours in another capacity?

  • Angel M

    Jenn B. I was an HR manager at a former employer and everyone there was classified Non exempt and paid OT when needed. They had paid out a big claim for missclassification and did not want to have anymore hassles.

  • Larry

    Mary – it seems as if these employees are salaried/non-exempt, therefore the sick leave can be provided as “daily” or just sick leave. I would list it as such.
    B. Smith – these employees are usually regarded as working supervisors or leadmen. They may be non-exempt by what you described I would do more research on this.
    Jenn B. – you can pay anyone hourly if you choose, and you can pay overtime if you choose. Where you get into trouble is classifying people exempt when they really are not to avoid OT.

  • Mary R.

    In response to Mary’s question about salaried office employees, I don’t have enough information to say for sure in her exact case, but I will give my best attempt at an answer. Our payroll is done monthly. We have a lot of salaried employees but not all are exempt. We have salaried non-exempt employees, and we have them turn in monthly attendance sheets. We keep up with their time off on a spread sheet and count their time off by the hour. So if they take more than their allowed sick time, we definitely will deduct it from the next month’s pay. By the same token, they get overtime pay as well and we also keep up with it on the spread sheets. However, my understanding of salaried exempt is that you cannot deduct pay for illness or disability in less than full-day increments. If you make a practice of improperly deducting from their pay, you lose OT exemptions for all employees in the same job classification under the individuals responsible for the improper deductions during that same time period. Really confusing, right? I would recommend counseling the exempt person for attendance problems and just pay them out rather than risk violating the law on this one.

  • Don

    It was mentioned above”the company can’t deduct their pay based on quality or quantity of work (except when an employee misses an entire day), or for lost or damaged equipment. Companies can still make workers pay for equipment they damage — you just can’t take the amount directly out of someone’s paycheck”. Need clarification how we do that. we have substantial loss of equipment from our salaried employees. Also, does this also hold true for cash shortages as wee?that we may not “directly”deduct equipment damage

  • Rosalie

    I would like to know how the exempt status of someone who has been temporarily appointed to a Director’s position in addition to doing her mainly does the non-exempt work? The person received less than $3 an hour raise for the job but actually works lots more hours and is paid less per hour due to performing both positions. Can anyone answer and point me to back-up proof we can present to defend the answer? I really need help on this one!

  • Question concerning #4 Administrative Assistant’s overtime. We have an Administrative Assistant who was made salary last year because she was working so much overtime (for years). She still continues to work alot of overtime because of her job duties and workload. This Administrative Assistant handles payroll, human resources, accounts payable, credentialing, building maintenance/contracts, telephone system programing, and anything her CEO or Physicians need handled. This is a large physician’s practice. This employee is always working late.

    Question: Is she intitled to be paid overtime for anything over 40 hours a week?

  • Cindy

    The law states…”the company can’t deduct their pay based on quality or quantity of work (except when an employee misses an entire day)” This refers to deducting from their pay but what about deducting hourly increments from their personal, vacation or sick time when an exempt person leaves early or comes in late for personal reasons?

  • Barb

    I just want to point out that the job title “foreman” should be changed to something that is gender neutral.

  • Nicole

    According to the 2008 California Labor Law Digest, “An amendment to the DLSE Enforcement Policies and Interpretations Manual authorizes employers to charge an exempt employee’s accrued vacation/PTO bank for partial day absences of four hours or more. This may be done only if the employee has such accrued time available… Different rules apply to partial day absences due to illness for which deductions may be made from an exempt employee’s available sick leave bank without the requirement that the absence be for four hours or more.”

    I am not sure how this rule plays out in state other then California, however.

  • Mary R.

    Response to Nicole – My answer was for if they had no more time available from that bank of time. We don’t deduct time for banked hours either. For exempt salaried employees we allow time off in half day increments or more from their banked time of PTO/sick time and vacation days. We would only deduct if they were out and had no more banked hours they can take and then we could only do it in full day increments, that is why the counseling sessions would be preferred. Sorry I did not make that clear. So I totally agree with your assessment!

  • Cindy

    I’m still at a loss……so in California, you can deduct from an exempt employee’s bank of personal,sick or vacation time if they leave work for greater than 4 hours but this isn’t neccesarily true in other states.

    So the law states they can’t dock your pay based on quality or QUANTITY of work but can they dock your PTO time?

  • Jane

    For the salary exempt employee, our understanding from legal counsel is that if they show up they get paid for that day. I have also heard about the 4 hour mentioned in this forum. So if you have an exempt salary employee, do they just take that time as salary time (not deducted from anything)? can you legally deduct from their sick/vacation allotment?

  • Cate

    These questions about using paid accrued time are baffling me as well. When the law indicates you can not deduct time for illnessinjury in less than a full increment and the individual needs say 2 hours to go to the Dr why can’t we substitute 2 hrs from the accrued time off? I hope I made that clear. An exempt employee needs 2 hours sick to go to the doctor and has the time can I combine that 2 hours with the rest of his weekly pay to make his weekly salary? Thanks! Cate

  • Patti L.

    I’m so confused at how an employee can protect themselves. My husband is considered Manager/non-exempt. He has say in opening, closing, directing employees, ordering, etc. Is it ok to be Non-exempt? Doesn’t he have to be Exempt? Can an employer just say, no you can’t, you are non-exempt and i will dock your ck because you no longer have sick or vacation time? That is what is happening. He’s afraid to make any legal move due to being harrased or fired. But he is manager of an automotive shop. For the first time in four years, he was docked $300 for missing a day for his granddaughter’s birth which we almost lost our baby due to complications. He was told by his emplolyer he could have the next two days off also. Without being notified that he was out of sick/vacation and then was going to be docked. Can an employer do this? He insisted on meeting with her because of confusion now. She declined to meet with him until it was convinient for her. So the day he was told not to come in because she couldn’t meet with him so he’s being docked for that day now. Once meeting took place, she ended up not agreeing to put anything in a contract for him, because we are confused now as to how he is being paid. She said no and yelled at him and decided that he didn’t need to come into work until the following week. I’m afraid she will dock him the whole week. Can she do this?

  • We are a small not-for-profit organization and have been told conflicting information regarding our need to classify our salaried employees. We have 23 employees, 6 of which are salaried, and would be classified as exempt. We have been told by someone that we do not have to classify our employees because we are an NPO and have less than 25 employees. Is this accurate. If you know the answer, and could please respond to my email that would be great! Thank you.
    info@pathblazer.org