Most people can work straight through an entire day without any sort of break. People need to take care of their basic needs. With the slight exception of child labor laws, federal laws do not require meal and rest breaks. Many states do, however. I can’t get into every state requirement here, and you might not have the time to read through the entire post if I did. So let’s get back to FLSA basics. Any employee that does not fit within one or more FLSA exemption categories must be paid for all hours worked, including overtime.
What do we mean by “all hours worked”? Does break time count as “hours worked”? Maybe. Let’s use this real live example.
Health Care Solutions at Home, Inc and Lincare Inc provide, well, home care services in different locations in Pennsylvania. Among other positions they employ people in customer service representative positions. They are paid hourly, no one seems to be disputing that these positions are not exempt from overtime requirements. Both employers provide 30-minute lunch breaks and bonuses. So far so good, right? I’m certainly not faulting an employer who provides lunch breaks. Neither federal nor state law in this case require them, but still, not giving employees time to eat lunch generally doesn’t work well. Similarly, bonuses are not expressly required by statute either. So what’s the problem?
These employers didn’t pay their employees for time taken for lunch breaks. Why is that a problem if the employees weren’t working? According to the customer service representatives, they were still actually working during that time. There’s more though. Allegedly, these employers altered the employees’ time cards to look as though the employees took the break time and then deducted that time from the employees’ pay. You probably don’t need me to tell you that these are very big no-no’s.
Before I address the bonus issue, I want to make one more point about breaks. Under the FLSA you do have to pay for short breaks, (20 minutes or less). For any breaks longer than 20 minutes though, you must relieve the employee of ALL work responsibilities or you will have to pay for the longer break time as well. In this case, the employees allegedly were working during those entire 30-minute breaks.
Now for the bonuses. Why might an employee complain about bonuses? Well they weren’t complaining about the bonuses themselves. These employees complained that they weren’t receiving overtime pay due them. But what do bonuses have to do with overtime pay? Under the FLSA, non-exempt employees who work more than 40 hours in any week must receive 1.5 times their regular hourly rate for each of those hours in excess of 40. Guess what? If the bonus is non-discretionary, you must include that in the employee’s regular pay rate and then calculate the overtime pay based on that. If you give bonuses that are payable to all employees who meet specific criteria (e.g. longevity, productivity, meeting specific goals) that’s a non-discretionary bonus. Bonuses that you decide to give out because you had a good quarter or year or because you feel like it and the employee has no reason to expect them, are discretionary. Those you do not have to include in an employee’s regular pay rate for overtime calculation purposes.
The employees in our real, live case example sued and the case ultimately settled for $21,900.01. The court approved the settlement last week. (As you may know, settlements of FLSA claims are supposed to be approved by either a judge or the Department of Labor.) You can read the settlement approval here if you are interested.
So, here are some things you can do to avoid being in the same situation:
- Make sure your employees take their lunch breaks–but if they don’t, then:
- Make sure you pay them for the time;
- Don’t ever alter time records. You can be subject to significant penalties and in some cases criminal sanctions;
- Re-visit your policies on overtime. Make sure your policies state that overtime must be authorized. Let employees know that they’ll be paid for time worked but will be disciplined for unauthorized overtime up to and including termination of employment;
- If you give your employees non-discretionary bonuses, make sure you include them in the employee’s regular pay rate, when calculating overtime.
- Enjoy your lunch!
Contents of this post are for educational/informational purposes only, are not legal advice, and do not create an attorney-client relationship. Consult with competent employment counsel in the state(s) in which you employ people with your specific questions.
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