Readers of our earlier post have asked whether there are additional ways to control or even reduce labor costs consistently with the federal Fair Labor Standards Act.  There are, and we will again divide our discussion between mistaken beliefs and possible opportunities.

Avoid Expensive Misconceptions

There are other recurring points of "conventional wisdom" that can drive up wage costs.

One is the erroneous view that an employer must pay the same hourly rate for compensable travel time or training time that it pays for the employee's normal or principal work.  But the fact is that nothing in the FLSA prevents an employer from paying a different and lower hourly rate (of not less than the minimum wage) for different kinds of worktime.  How the employer figures overtime compensation in those situations is beyond this post's scope, but it can be done without great difficulty.

Another example is the proposition that employees must be paid overtime compensation for working beyond their scheduled stopping times.  This is not the case under the FLSA, which (with a few specialized exceptions) only requires overtime pay for hours worked in excess of 40 in a workweek.  It is of course possible that a union contract, an employer's policy, an employment contract, or a state daily-overtime law might call for a different answer.

Consider Additional Alternatives

The FLSA does not say that non-exempt employees must be paid at an hourly rate or in any other particular way.  It simply requires that, whatever the pay plan is, the employer must still comply with the FLSA's minimum-wage, overtime, and timekeeping requirements.  This leaves a lot of room for a variety of approaches, such as:

♦   A salary-plus-overtime arrangement, which can take different forms depending upon what number of hours worked the salary is paid to compensate;

♦   A day-rate plan, which is based upon an employee's receiving a fixed amount for each workday in which he or she performs any work, without regard to the number of hours worked in the workday;

♦   A piece-rate or job-rate plan, under which employees receive a fixed amount for each piece or item produced or job completed; or

♦   A commission plan, which calls for employees to receive sales-based compensation.

Naturally, an employer should be careful in designing, implementing, and administering any pay plan to ensure that the plan actually produces FLSA-compliant wages.  For instance, the employer still must compute and pay the necessary FLSA overtime premium under a day-rate, piece-rate, job-rate, or commission method.

And, as we said last time, employers must be certain that whatever they decide to do is also permitted under all applicable state and local laws, under special "prevailing wage" requirements, and so on.

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Employers' continued struggles with labor costs have led to additional hourly-rate cuts, salary reductions, furloughs, layoffs, and similar conventional measures.  But are there other potentially less-disruptive and legal options?  There might well be.

What Does The Law Really Require?

For one thing, management should purge pay plans and policies of any expensive misconceptions about what the law does and does not require.  For instance, some employers believe that non-exempt employees' unworked paid-time-off for holidays, sick days, or even vacation days must be counted as hours worked when computing overtime under the federal Fair Labor Standards Act.  This is not so, and eliminating this unworked paid-time-off from FLSA overtime calculations could result in appreciably lower wage costs.

Also, some state wage-hour laws are considerably more employee-favorable than either the FLSA or similar laws in other jurisdictions.  Whether through misunderstanding or for other reasons, some organizations employing people in multiple states pay all employees as if they work in the jurisdiction with the highest wage requirements.  As an example, a multi-state company might pay non-exempt Georgia employees overtime for hours worked over eight in a workday (even though Georgia does not require this), because the company is legally obligated to do so for similar California workers.

What Pay Alternatives Might There Be?

Employers should also consider relatively-straightforward measures that could cut or at least minimize labor expense.

One illustration relates to the seven-day "workweek" that employers must select and document in order to comply with the FLSA's overtime requirement.  Most employers must of course pay non-exempt employees FLSA overtime premium for all their hours worked over 40 in a single workweek.  While the workweek cannot be changed retroactively or frequently to evade the FLSA's obligations, the workweek can be re-established on a lasting, going-forward basis.  And employers can choose different workweeks for different groups of employees or for different locations.  If patterns of activity unique to a particular department or facility typically add up to overtime hours under the workweek that applies company-wide, then the employer could consider whether adopting a separate workweek just for that department or facility would decrease or eliminate the overtime costs.

Management should also consider whether helpful FLSA exemptions, exceptions, or refinements might be available.  Some of these measures might affect wage costs directly.  Others might streamline the payroll process so as to reduce administrative expense.  Still others might tie compensation more closely to productivity so as to increase revenue (see our post on the Section 7(i) exemption, for example).  Of course, in today's legal environment, it is essential to evaluate these matters carefully before acting.  Possible missteps flowing from near-term financial pressures will ultimately be self-defeating or worse if they provoke million-dollar litigation.

As always, employers must be certain that whatever they decide to do for FLSA purposes is also permitted under all applicable state and local laws, under special "prevailing wage" requirements, and so on.

And whatever the law permits, employee morale is obviously an important consideration.  However, employees might well react favorably to measures that avoid more-stringent steps, such as layoffs.

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Affected employers will no doubt have a variety of wage-hour questions in the aftermath of Hurricane Irene.  The number and scope of the issues raised might well be practically endless.  In this post, we address in very general ways the federal Fair Labor Standards Act topics that experience suggests will be among the most-pressing.

◊   What do we do about lost time records for work already performed but not yet paid?

If the only records of hours worked are lost or unusable, then there is no perfect solution.  Re-create the most accurate accounting you can under the circumstances.  Perhaps the preferred approach is to ask each employee to make the best-possible estimate of his or her hours worked. You should obtain the employee's written acknowledgement of his or her best recollection and should include the employee's authorization allowing later corrections in worktime and pay should more accurate hours-worked information become available.

◊   How do we track employees' worktime without our electronic/computerized time clocks?

Employees may record all hours worked by using handwritten timesheets.  To ensure accuracy, each employee should enter his or her own time and should record the actual times when the employee's work starts and stops each workday.

◊   As we recover, must we keep paying overtime on top of our other burdens?

At this time, there is no FLSA "emergency" exception that relieves the obligation to pay FLSA-required wages.  Employees subject to the FLSA's overtime provision must receive overtime premium at a rate of at least 1.5 times their regular rates of pay for all hours worked over 40 in the designated seven-day workweek.

If employees are covered by a collective bargaining agreement, it might contain additional overtime provisions requiring more than the FLSA does.  Perhaps the terms of the agreement relax those requirements in emergencies.  However, a collective bargaining agreement cannot override the FLSA's requirements.

◊   Can an employee volunteer to perform recovery services for us without pay?

The FLSA does not permit employees to "volunteer" unpaid time to the employer under any but the narrowest of circumstances.  For example, if a manufacturing facility sets up a hotline or makes other arrangements to provide a clearinghouse for information about the status of the workplace and employee reporting times, non-exempt employees volunteering to perform such services are engaged in compensable hours worked for FLSA purposes.  Employers considering any kind of unpaid "volunteer" services by their employees should evaluate the legality of doing this carefully and in advance.

◊   Must we keep paying employees who are not working?

Under the FLSA, for the most part the answer is "no".  FLSA minimum-wage and overtime requirements attach to hours worked, so employees who are not working are typically not entitled to the wages the FLSA requires.

One possible FLSA-related exception is for employees treated as FLSA-exempt whose exempt status requires that they be paid on a "salary basis".  Generally speaking, if such an employee performs at least some work in the designated seven-day workweek, the "salary basis" rules require that he or she be paid the entire salary for that particular workweek.  There can be exceptions here, too, such as might sometimes be the case where the employer is open for business but the employee decides to stay home for the day.

Also, non-exempt employees paid on a "fluctuating-workweek" basis under the FLSA normally must be paid their full fluctuating-workweek salaries for every workweek in which they perform any work.  There are a few exceptions, but these are even more-limited than the ones for exempt "salary basis" employees.

Of course, an employer might have a legal obligation to keep paying employees because of, for instance, an employment contract, a collective bargaining contract, or some policy or practice that is enforceable as a contract or under a state wage law.

◊   What can we do about charging missed time to vacation and leave balances?

The FLSA generally does not regulate the accumulation and use of vacation and leave.  The "salary basis" requirements for certain FLSA-exempt employees can implicate time-off allotments under various circumstances, some guidance on which the U.S. Labor Department has provided in opinion letters accessible here and here.

Again, however, what an employer may, must, or cannot do where paid leave is concerned might be affected by an employment contract, a collective bargaining contract, or some policy or practice that is enforceable as a contract or under a state wage law.

◊   When is travel time "hours worked" for purposes of computing FLSA wages due?

FLSA travel-time "rules" are not seamless, up-to-date, or necessarily logical or consistent with common sense.  The best-known ones are that:

•   Normal commuting between home and work typically is not considered to be hours worked, and

•   Travel between one assignment and another during a workday typically is hours worked.

However, even these principles are subject to exceptions and elaboration.  The best starting point is to consider each scenario an employer faces under the U.S. Labor Department's basic interpretations on travel time.  They are compiled at 29 C.F.R. §§ 785.33-785.41 and may be accessed here.

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Remember that other requirements, such as those applying to government contractors or subcontractors and those of states or other jurisdictions, can also be relevant to these questions.

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