Wage-and-hour rules continue to trip up many businesses

Wal-Mart has more than 2 million employees, so you’d assume the company knows a lot about employment law. But the retailer was recently ordered by the Pennsylvania Supreme Court to pay more than $150 million to tens of thousands of workers for violating the federal wage-and-hour laws.

What did Wal-Mart do wrong? The workers claimed that many of the stores were understaffed, so the managers compensated by making employees work through their rest breaks, take shortened breaks, or work “off the clock” after hours.

The employees brought a class action lawsuit. A shortened work break here or there might not seem like much, but multiply that by many employees and many days, and the numbers add up quickly.

The wage-and-hour laws are very simple in theory, but they can sometimes be complex in practice, especially given the realities of the modern workplace. Although the basic rules have been around since the 1930s, it’s surprising how often they continue to be broken.

For example, the overtime laws apply to employees unless they are “exempt.” Generally, employees are “exempt” if they earn at least $23,600 a year, are paid a salary rather than an hourly wage, and perform managerial or professional tasks.

But some people you might think are exempt really aren’t. For instance, the U.S. Supreme Court recently ruled that many mortgage loan officers are non-exempt. According to the court, mortgage loan officers may be exempt if their primary duty is sales and they do a lot of their work on the road. But if they’re in the office most of the time – particularly if they’re working in a call center – they may be eligible for overtime.

Another difficult case is truck drivers. You might assume that truck drivers are non-exempt, but the main federal wage and hour law has an exception that says many drivers are exempt.

However, Congress passed another law that contains an exception to the exception. Recently, a federal appeals court in Philadelphia decided that a driver of an armored car was entitled to overtime because she fell within the exception to the exception.

Meanwhile, new regulations pending from the Department of Labor are expected to increase the minimum salary for exempt workers and make more types of jobs non-exempt. As a result, many store managers could become eligible for overtime, even though their work involves management.

Sometimes there’s a question of whether someone is even an employee. For instance, a number of vocational and technical schools have their students perform work for which the school charges customers. The students get academic credit for the work – but are they also “employees” who need to be paid under the wage-and-hour rules?

Recently a federal court in New York said a group of cosmetology students had to be paid as employees when they provided beauty treatments to paying customers as part of their coursework.

The beauty school argued that the students didn’t work in a real salon and weren’t replacing actual employees. But the court said the school was making an unfair profit because it was in competition with other, real salons that had to pay minimum wage and overtime.

The court also noted that the students were asked to perform janitorial work in the beauty area, sell beauty products, and perform other duties that didn’t relate to their coursework.

There can also be an issue when an employer puts so many restrictions on workers’ breaks and rest time that their free time is no longer really “free.”

For instance, a hospital in Wisconsin recently had to pay $3.5 million to 1,400 nurses who’d been told to stay within a designated area during their meal breaks so they could hear the PA system. Though they weren’t being deprived of their breaks, the court said the hospital violated the law because the nurses weren’t actually relieved of all their duties.

Other employers have run into trouble where they asked workers on break to be available for emergencies, but didn’t give them a chance to punch back in before attending to an emergency.

Finally, some employers have tried to avoid the overtime laws by giving workers “comp time off” instead of overtime pay. This is illegal. If employees work more than 40 hours in a week, they must be paid overtime – even if they get an equivalent amount of time off the following week.