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Dispelling the 10 Biggest Wage and Hour Myths

On what seems like a daily basis, I receive a phone call from a client or prospective client who is confused about some aspect of wage and hour law.  Myths and urban legends abound in this area of the law.  Passed on from person to person and company to company, the more they are repeated, the more believable they become.  Today, I will take aim against five of the most frequently encountered myths about properly compensating employees.  Please note that the commentary below is based solely upon federal and New Jersey law.

  1. Employees are entitled to mandatory work breaks. NO!  With the exception of truck drivers and minors, employees have no legal entitlement to any breaks during the work day.  This includes lunch and meal breaks.  While most employers provide a lunch or meal break, employees have no legal entitlement to such breaks. In the event that an employer is unionized, the break issue will be governed by the applicable collective bargaining agreement.
  1. All salaried employees are exempt. WRONG!  Paying an employee on a salaried basis is only one requirement of the FLSA’s white collar exemptions.  If the employee’s job fails to satisfy all of the duties requirements of the exemption, the employee will not be exempt and will be entitled to overtime for all hours worked in excess of 40 in a work week.  Paying a clerical employee a salary does not make the employee exempt from the FLSA’s overtime requirements.
  1. Employees are entitled to be paid for accrued but unused vacation, sick time, or PTO upon the termination of employment. NOPE!  Neither federal law nor New Jersey law requires employers to pay out accrued but unused vacation, sick time, or PTO upon termination of employment.  In New Jersey, this issue is dictated by policy and/or practice.  Whether or not an employee is entitled to payment will be determined based upon the applicable employer policies.  It is perfectly acceptable for an employer in New Jersey to adopt a PTO, vacation, or sick leave policy that states “upon the termination of employment, employees will not be paid for any accrued, but unused leave (vacation, sick, PTO).  Similarly, New Jersey employers can condition the payment of such accrued but unused leave upon the employee satisfying certain conditions (e.g., appropriate notice of termination, no-fault termination, etc.).
  1. An employee who works unauthorized overtime is not entitled to overtime pay. NADA.   Consider this scenario:  Fred asks his boss if he can work on Saturday to get caught up in his work.  Fred’s boss says no because he does not want to incur the overtime cost.  Fred disregards his boss’s decision and works 8 hours of overtime on Saturday.  When his boss finds out, he is furious because of Fred’s insubordination; the boss refuses to pay Fred for the overtime work because it was “not authorized.”  Fred’s boss has violated the FLSA.  The employee must be paid for all hours worked, even unauthorized hours.  The employer’s recourse here is discipline or termination, not withholding pay.  My guess is that Fred will be polishing up his resume.
  1. Employees who prefer time off instead of overtime can be given compensatory time off in lieu of overtime pay.  GUESS AGAIN!  There is no such thing as compensatory time off in the private sector.  While public sector employers are able to substitute compensatory time off for overtime pay, private sector employers cannot.  Consequently an employee who works 8 hours of overtime this week cannot be given time off with pay for 8 or 12 hours next week.  The employee must be paid for the overtime hours.  Work schedules can be manipulated in the same work week in order to avoid overtime pay (i.e., Monday through Thursday, the employee works 36 hours; the employer can instruct the employee to work only four hours on Friday to avoid overtime).  Overtime earned in week one cannot be erased in week two by providing compensatory time off.   Please note that the FLSA does permit employers to adopt Time Off Plans; however, these plans are very difficult to administer and, in many situations, will not eliminate overtime liability.
  1. Job title dictates exempt status. NEVER!  Simply inserting the word “supervisor,” “executive,” or “manager” into an employee’s job title does not make the employee “exempt” from the overtime provisions of the FLSA (e.g.,  Assistant Manager, Shift Supervisor, Executive Assistant, Custodial Manager, Environmental Specialist).  In order to qualify for the FLSA’s executive exemption, the employee must meet all of the requirement for the exemption:  (1) guaranteed salary of at least $455 per week (the proposed changes to the salary threshold are currently on hold thanks to the United States District Court for the Eastern District of Texas); (2) primary duty is managing the employer or a customarily recognized department or subdivision of the employer; (3) the employee regularly supervises two or more full-time employees or their equivalent; and (4) the employee has the authority to hire/fire, or the employee’s recommendations in this regard are given particular weight by management.
  1. Subsequent to exhausting paid leave, the salary of an exempt employee can be docked when the employee comes in late or leaves early due to sickness or personal reasons. SORRY.  WRONG AGAIN.  An employer can never dock an exempt employee’s salary for partial day absences (unless the absence is FMLA-qualifying).  The only permissible deductions from an exempt employee’s salary are for:  (1) full day absences after the employee has exhausted all available paid leave; (2) infractions of safety rules of major significance; (3) disciplinary suspensions of one or more full days for violation of workplace conduct rules; (4) pro rata adjustments for the first and last week of employment; and (5) unpaid leave pursuant to the FMLA.  Consequently, if an exempt employee has exhausted all available paid leave, arrives to work at 8 am, and leaves work at 8:30 am because of sickness (that is not FMLA-qualifying), the employer cannot deduct any amount from the employee’s weekly salary because this was not a full day absence.
  1. Employees who perform work during their unpaid lunch do not have to be paid. NO! NO! NO!  In order for a lunch/meal break to be unpaid, the break must be 20 minutes or more and the employee must be “completely relieved” of all work during the break.  Any work performed by the employee during an “unpaid” lunch break transforms the break into a paid break.  This is true even if the employee performs the work “voluntarily” or “without authorization.”
  1. We require our employees to “clock out” for all breaks and therefore all breaks are unpaid. DO NOT PASS GO!  HEAD STRAIGHT TO JAIL.  According to FLSA regulations, only breaks of 20 minutes or more can be unpaid.  Consequently, any breaks of less than 20 minutes must be paid.  It does not matter if the employer has required the employee to “clock out” for the duration of the break.  If the break was for less than 20 minutes, the employee must be paid for the time (even though his or her time card indicates no work during that time period).
  1. An employer cannot unilaterally reduce an employee’s rate of pay. GAME OVER.  FEEL FREE TO TRY AGAIN!  Absent an employment agreement or some other contractual limitation, employers can unilaterally reduce an employee’s rate of pay.  There are no federal laws limiting this right.  Under New Jersey law, the only requirement is that the employer must give the employee advance notice at least one full pay period prior to the effective date of the change.  Obviously, a retroactive reduction in an employee’s pay rate is impermissible.  If, however, the employer informs the employee in advance (by at least one pay period), the employer is permitted to reduce the employee’s rate of pay (both hourly and salary).
  1. Employees who work more than 8 hours in a day are entitled to overtime. I know that I said 10, but I lied.  I couldn’t resist adding one more. An employee is not entitled to overtime compensation for working more than 8 hours in a day.  An employee can work 24 hours in a day and still not be entitled to overtime compensation.  In order to have an overtime entitlement, the employee must work more than 40 hours in a work week.

I hope you enjoyed my own special version of Myth Busters.  I’m off now to see whether I can find any Leprechauns for next Friday’s festivities!

For assistance with this matter and any other labor and employment matter, please do not hesitate to contact a member of our Labor and Employment Department.