Cost-Effective FLSA Compliance

Eadaoin Waller

We all know that under the Fair Labor Standards Act (FLSA), non-exempt workers should be paid for all work hours, including time spent on tasks which may be outside of their core employment obligations – such as training, meetings, education and travel between worksites.  A novel question on this topic cropped up in our employment practice recently, and we thought it worth sharing the answer we found.

A service industry client had been conducting in-house training for its non-exempt employees on a quarterly basis for years.  The training was related to the employees’ jobs – keeping their skills up-to-date and fresh.  However, these training sessions had always been unpaid.  Nobody had ever complained; indeed, the work-based training was viewed as a perk by most employees – an investment in their professional development.  However, it was clear that this would have to be corrected going forward, at a not-inconsiderable cost.  The question was how to minimize this new cost to the business.

There are several options for correcting a wage and hour issue like this one.  The first is to simply pay for the training hours going forward at each employee’s regular rate.  This option proved too expensive for our client.  The next option was to reduce each employee’s hourly rate, and compensate them for the training hours (paying them approximately the same amounts overall, on a quarterly basis, but with a reduced hourly rate of pay).  This would be a tough sell to existing employees, however, as it looks like a pay cut on paper.  It would also impact recruitment negatively.  The third option was to compensate all non-exempt employees for training hours at minimum wage.  Although unorthodox, this is permissible under the FLSA.  There is no requirement that all work be compensated at the same rate – less profitable tasks can be compensated at a lower rate, as long as overtime and minimum wage rules are observed and as long as the employee has notice of how each task will be compensated.

The client issued a notice to all non-exempt employees, stating that from that point forward,  all training hours would be compensated at minimum wage.  Although this did not correct the compliance issue entirely (in order to do that, the employer would have to issue two years’ back-pay [at the employees’ regular rate of pay] for training hours).   However, with that that solution being cost prohibitive, the prospective solution chosen by the client was a perfectly reasonable “next best thing”.

Keep in mind, though, that a good knowledge of the applicable regulations is necessary to navigate the facts in any situation, and just because this solution worked for this client, it may not work for you.  If you are facing a situation like this one we urge you to obtain legal counsel to ensure compliance.

Do you want to use this blog article?

You may, as long as you include this complete bio with it:

Eadaoin Waller is a Georgia attorney, focusing her practice in corporate law.

Her firm, Andersen, Tate & Carr, P.C., works with all manner of clients in business and personal matters, providing “big firm” sophistication with suburban law firm attention and service.

Website: www.atclawfirm.com

Blog: www.andersentatecarr.wordpress.com

 Copyright © 2013 Eadaoin Waller & Andersen, Tate & Carr, P.C.

Advertisements
%d bloggers like this: