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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Section 3(m) of the federal Fair Labor Standards Act allows a portion of the employee's FLSA-required minimum wages to consist of tips.  Unfortunately, it is all-too-common for employers to make expensive mistakes where tips are concerned.

Fundamental Rules

Tipped employees are those engaged in occupations in which they customarily and regularly receive more than $30 a month in tips.  Tips they actually receive may be counted as FLSA wages up to a current maximum of $5.12 per hour; the employer must pay them at least $2.13 an hour in addition to tips.  The FLSA requires an employer to tell each tipped employee about the law's tip-credit provisions in advance.  And, as we reported in May, the U.S. Labor Department now says that other notifications are also required.

The employee's creditable-tips-plus-wages total must come to at least the current minimum wage of $7.25; the employer must make up any shortfall.  Employees must be allowed to keep their tips, except that they can be required to contribute to a tip-pool participated in only by other employees who customarily and regularly receive tips.

Pitfalls and Misconceptions

Among the typical problems are:

♦   Failing to provide the necessary tip-credit notification;

♦   Not ensuring that the total of an employee's hourly wage plus his or her creditable tips equals at least the minimum wage; or

♦   Not being able to document that employees actually received enough in tips to cover the credit taken.

Employers also find themselves facing liability for:

♦   Taking the tip-credit for hours a "dual function" employee spends in non-tipped work (learn more here);

♦   Calculating overtime at 1.5 times only the employee's $2.13-per-hour cash wage;

♦   Taking a larger tip-credit for overtime hours than for non-overtime ones;

♦   Withholding uniform costs, shortages, breakage, "walk-outs", and so on from an employee's tips; or

♦   Maintaining invalid tip-pools.

Trouble can also result from lumping both tips and service charges under the catch-all term "gratuity".  An FLSA tip-credit "tip" is a payment the patron decides whether to make, and as to which the patron decides how much to give and to whom to give it.  No tip credit may be taken for a compulsory service charge imposed by the employer.  What's more, service charges paid to employees must be included when figuring any FLSA overtime pay they are due.

What About Other Laws?

Some states do not permit taking a tip-credit, while others allow one but restrict the amounts in ways which are different from the FLSA's provision.  Also, an increasing number of states and other jurisdictions prescribe what employers may, may not, and must do where sums representing tips and service charges or fees are concerned.

Employers should immediately check to see whether tips and tip-credit matters are being handled in the proper way.  Even if things used to be fine, management is not always aware of changes in the law or in day-to-day procedures that can lead to major problems.

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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.

________________

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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The U.S. Labor Department's unfounded April fluctuating-workweek commentary (earlier post here) continues to complicate many pre-existing pay plans and to cause employers to narrow their views of the available compensation alternatives.  This is the foreseeable (and apparently intended) result of what DOL said.  Unfortunately, some observers are compounding the impact of DOL's commentary by suggesting that its ramifications are more dire than ought to be the case.

We have previously noted that the federal Fair Labor Standards Act grants no regulatory authority to DOL to make such pronouncements.  Probably for this reason, the commentary purported to draw substance from sprinkled-in references to the seminal U.S. Supreme Court case of Overnight Transportation Co. v. Missel, 316 U.S. 572 (1942), which embraced the concept underlying the fluctuating-workweek calculation.  But DOL's effort is an illusion.

For example, Missel does not support DOL's assertion that paying bonuses, incentive payments, or other additional amounts is "incompatible" with figuring overtime on a fluctuating-workweek basis.  The Court did not address this proposition at all; it simply proceeded from the facts as they were presented (which involved a weekly wage for whatever hours the employee worked) and explained how FLSA overtime was to be computed on those facts.  The Court did not say, or so much as even imply, that the fluctuating-workweek calculation was inappropriate where other forms of pay are in the picture.

DOL also opined that fluctuating-workweek overtime might create an incentive to work employees long hours because it "results in a regular rate that diminishes as the workweek increases . . .."  On this premise, DOL found it inappropriate "to expand the use of this method of computing overtime pay beyond the scope of the current regulation."  Of course, the FLSA does not prescribe and in fact does not even address any maximum number of hours that adult employees can be required to work.  Moreover, DOL is not authorized to decide whether to "expand" or contract the use of the fluctuating-workweek method for computing overtime.  The Supreme Court's reading of the FLSA trumps DOL's musings in this area, and DOL must have overlooked this statement in Missel:

It is true that the longer the hours, the less the rate and the pay per hour.  This is not an argument, however, against this method of determining the regular rate of employment for the workweek in question.

316 U.S. at 580.

Having thrown sand in the gears, DOL has offered no specific elaboration upon what the actual effects of its commentary might be.  Others have filled this gap with suppositions that are not anchored in first principles.

As an illustration, assume that an employee receives a salary of $500 each workweek as straight-time pay for all hours worked and is also paid commissions on her sales made during all her hours worked each workweek.  Assume also that, in one workweek, she works 50 hours and is due $100 in commissions, for total gross pay of ($500 + $100) = $600.  Even if her commission pay is supposedly "incompatible" with fluctuating-workweek overtime, how much FLSA overtime pay is she due for that workweek?

Some have suggested that her overtime must be computed this way:

($600 ÷ 40 hrs.) = $15 Per Hr. "Regular Rate"
($15 × 1.5 × 10 OT hrs.) = $225,

for total FLSA pay of ($600 + $225) = $825.  In our view, dividing by 40 hours and paying an extra 1.5 times the resulting rate for overtime hours is not required under the FLSA, notwithstanding what DOL said.

Under Missel, the FLSA "regular rate" is determined by dividing the employee's total compensation for a workweek by the total number of hours for which that compensation was paid.  This is so whether the straight-time wages are paid for a fixed number of hours or for a varying number of hours, and it remains the bedrock principle underlying FLSA overtime pay.  See, e.g., 29 C.F.R. § 778.109.  Where the straight-time wages were paid for all of the employee's hours worked, the proper FLSA overtime premium is one-half of a regular hourly rate that declines as the hours worked increase.  See, e.g., 29 C.F.R. § 778.118.

And, more to the immediate point, this is all still true even when a fluctuating-workweek approach is "invalid or otherwise inapplicable."  See, e.g., Opinion Letter of Wage-Hour Administrator No. 1016, 69-73 CCH-WH ¶30,563 (June 24, 1969)(discussed in our earlier post).  In other words, 40 is not automatically the default divisor, and 1.5 is not the inevitable multiplier, even if a fluctuating-workweek approach has been undercut for some reason.  Whatever the basis for the employee's pay is, and even if that basis is somehow legally flawed in whole or in part, the FLSA regular rate and the overtime due still depend upon the number of hours for which the compensation was paid.  Cf. Section 32g07(b), Field Operations Handbook (U.S. Labor Department, February 28, 1986)(40 hours not used as the default divisor even for an invalid "Belo" plan).

Because our hypothetical facts show that the employee's straight-time wages were paid for all of her hours worked, the correct FLSA calculation is:

($600 ÷ 50 hrs.) = $12 Per Hr. "Regular Rate"
[($12 ÷ 2) × 10 OT hrs.) = $60 OT Premium Pay
($600 + $60) = $660,

or $165 less than the first computation.  The principles leading to this approach are independent of whatever DOL's policy preference is, and DOL has no power to curtail them.

That said, unless and until DOL withdraws or repudiates its April statements, or until a court consensus rejecting them emerges, employers should expect investigators and plaintiff's lawyers to press those statements to the hilt.  Even so, the underlying FLSA overtime principles remain unchanged, and employers who are willing to do so should be ready to assert them.

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The U.S. Labor Department's April 5 Final Rule attempts to transform the principles of fluctuating-workweek pay plans in two ways.  Remarkably, DOL apparently plans to do so, not by facing up to these matters by actually proposing a straightforward revision of the relevant interpretative provision at 29 C.F.R. § 778.114, but instead via remarks in the preamble accompanying the Final Rule.

The Basic Concepts

A non-exempt employee's FLSA overtime pay must be based upon his or her regular hourly rate.  This is determined by dividing the employee's total compensation for a workweek by the total number of hours worked for which the compensation was paid.  See 29 C.F.R. § 778.109.

Under a fluctuating-workweek plan, the employee receives a salary that is paid as straight-time compensation for all of his or her hours worked in a workweek, however many or few, including hours worked over 40.  Thus, for overtime hours, the employee is due only an additional one-half of the rate obtained by dividing all of the workweek's hours into the salary (this rate can never be less than the minimum wage, of course).  The employee's regular hourly rate therefore fluctuates, that is, it decreases as his or her hours worked increase, and vice versa.  The employee is also due additional overtime premium for most other compensation he or she receives for an overtime workweek.

It is worth emphasizing from the outset that Congress has given no generalized regulatory authority to DOL where the FLSA's overtime requirements are concerned.  See, e.g., Reich v. Interstate Brands Corp., 57 F.3d 574, (7th Cir. 1995), cert. den., 516 U.S. 1042 (1996).  Thus, the fluctuating-workweek method is not some exception, exemption, or DOL-conferred dispensation.  See, e.g., Davis v. Friendly Express, Inc.,  2003 WL 21488682 (11th Cir. 2003); Samson v. Apollo Resources, Inc., 242 F.3d 629 (5th Cir. 2001); Dooley v. Liberty Mutual Insurance, 307 F.Supp.2d 234 (D. Mass. 2004).  Instead, Section 778.114 simply acknowledges the arithmetical realities of applying the basic regular-rate rule in one set of circumstances.  Notwithstanding the misinformed approaches of some courts in recent times, Section 778.114 does not (and may not) represent a set of prerequisites for using fluctuating-workweek plans.  "The fluctuating workweek doctrine is not a benefit to be withheld .  .  ., but rather is an interpretive tool to give effect to the understanding of the parties."  Dooley v. Liberty Mutual Insurance, supra.

Other Pay Besides The Salary

DOL's comments say that employers who rely upon fluctuating-workweek plans for non-exempt employees may not also pay these workers bonuses, premium payments, or other additional amounts.  This is supposedly "incompatible" with paying on a fluctuating-workweek basis.  This is a complete reversal of the views expressed in 2008, when the Bush administration's Wage and Hour Division proposed to make it clear that bonuses, premium pay, or other extra sums could be paid in conjunction with a fluctuating-workweek plan, as has been done for decades.

DOL recounts a variety of supposed horribles that it believes could result from making payments in addition to the salary, including the possibility that an employer might shift a large portion of an employee's pay away from a salary toward these other amounts.  This would, DOL says, potentially cause wide disparities in an employee's wages.  DOL provides no evidence that this has actually occurred in the 72 years since the law was passed, during which time innumerable employers have paid additional sums to employees otherwise compensated on a fluctuating-workweek basis.  More importantly, the FLSA has nothing whatsoever to do with whether there are disparities in an employee's pay from week to week.

As for what the FLSA actually does address – overtime compensation – even if extra payments purportedly undercut a fluctuating-workweek plan, general regular-rate principles lead to the same amount of overtime premium.  DOL recognized this long ago in Opinion Letter of Wage-Hour Administrator No. 1016, 69-73 CCH-WH ¶ 30,563 (June 24, 1969), in which the Wage and Hour Administrator said:

Where the salary for fluctuating hours of work method of compensation is invalid or otherwise inapplicable and an employee in a single workweek works at two or more different types of jobs .  .  . for which different nonovertime rates of pay are paid, the regular rate for that week is the weighted average of such rates.  That is, the total earnings from all rates are divided by the total number of hours worked in the workweek.  The employee would then be entitled to receive one-half of the resulting average hourly rate for the hours worked in excess of [40 in a workweek].

(Emphasis added).

DOL's other principal rationale apparently was that additional payments will somehow encourage the use of fluctuating-workweek plans, which the current administration disfavors.  DOL articulated no factual or evidentiary basis for this prediction, but in any case it is not up to DOL whether this concept is to be encouraged or discouraged – fluctuating-workweek calculations are simply an arithmetical fact.  And if this compensation method is so undesirable, why does DOL permit it at all?  The answer is that DOL has no authority to do otherwise.

An Alleged "Fluctuation" Requirement

DOL's comments also claim that the fluctuating-workweek method cannot be used unless the employee's hours of work actually fluctuate.  Nowhere does Section 778.114 say that the method is limited in this way, including that DOL still has not changed the provision to say so.  DOL's remarks refer without elaboration to Section 32b04b of its internal Field Operations Handbook, which prescribes a half-time calculation for a salaried employee "if" the worker's hours fluctuate from week to week.  But this discussion clearly uses "if" to mean "in this situation", rather than "on the condition that" (and the latter usage would not have legal force even so).

DOL is coy about what it means by "fluctuate".  The comments do not say how often or by what magnitude this supposedly must happen, for example.  DOL refers to Flood v. New Hanover County, 125 F.3d 249 (4th Cir. 1997)(upholding application of the fluctuating-workweek method), a case in which the employees' hours varied because they worked rotating schedules of different fixed lengths; so much for any meaningful use of the word "fluctuate".  If DOL instead has in mind that an employee's hours must vary irregularly and unpredictably, then its research apparently failed to disclose cases rejecting such an approach.  See, e.g., Griffin v. Wake County, 142 F.3d 712 (4th Cir. 1998); Mitchell v. Abercrombie & Fitch Co., 428 F.Supp.2d 725 (S.D. Ohio 2006).

In any event, once again the proper analysis leads to a half-time calculation for the hours covered by a salary whether or not there is any "fluctuation".  As an illustration, assume that a non-exempt employee is paid a weekly salary of $500 which is understood to be his or her straight-time pay for up to the individual's fixed, regularly-scheduled workweek of 50 hours.  Assume further that the employee's actual hours worked each workweek seldom vary above or below 50.  For workweek-after-workweek, the employee's total compensation required by the FLSA is:

($500 ÷ 50 hrs.) = $10.00 Regular Rate
($10.00 × ½ × 10 OT hrs.) = $50 OT Premium
($500 + $50) = $550 Total FLSA Pay Due.

If the employee works 45 hours in an isolated workweek, the pay due is:

($500 ÷ 45 hrs.) = $11.11 Regular Rate
($11.11 × ½ × 5 OT hrs.) = $27.78 OT Premium
($500 + $27.78) = $527.78 Total FLSA Pay Due.

See, e.g., 29 C.F.R. §§ 778.109, 778.325.

These half-time calculations are proper notwithstanding that the employee's hours worked are practically invariable.  They are unremarkable and appropriate applications of the regular-rate principle in Section 778.109.

What To Do Now?

Employers should anticipate that DOL investigators and plaintiff's lawyers will seize upon the Final Rule's commentary in order to attack the use of a fluctuating-workweek approach in many situations.  In fact, some believe that the commentary is indeed designed to influence courts to adopt DOL's views.  Only time will tell what the outcome of these disputes will be.

One option, then, is to stop using fluctuating-workweek plans altogether.  This appears to be DOL's preference.  Of course, some employers might find it possible to design alternative compensation methods that have exactly the same effect, such as commissions-only pay plans or piece-rate plans.

Or, an employer might decide to rely upon the fluctuating-workweek method only where the employee's hours "fluctuate" (whatever that means), and only for employees whose compensation is limited to a salary plus the additional overtime premium pay required in an overtime workweek.

Other employers might elect to continue with the fluctuating-workweek pay plans they have without regard to DOL's commentary, recognizing that they must be prepared to defend themselves someday in a possible DOL investigation or in court.

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In all her 20 years in human resources, Janice has never seen anything like it.  Bigtime Electronics fired its Production Manager Fred Smith last week, and now his lawyer has sent Janice a letter demanding that Fred be paid more than $20,000 for overtime worked during his employment.  Fred clearly met the requirements for exemption from overtime under federal and state wage-hour laws.

But the attorney refers to a sentence in Fred's hiring letter saying, "For payroll and withholding purposes, Bigtime Electronics will comply with all federal and state compensation laws and regulations."  The lawyer says that, even if Fred was otherwise exempt from overtime, this was a contract in which Bigtime nevertheless agreed to abide by those requirements.  Janice picks up the phone to call Bigtime's employment lawyer so that they can share a good chuckle.  Unfortunately, Fred might have the last laugh; at least one court has ruled that a similar sentence meant an employee was entitled to overtime under state law.

Increasingly, employees and former employees are invoking the words of a hiring letter, a compensation policy, a bonus memo posted on the bulletin board, and so on to make pay claims.  These contentions are often based, not upon minimum-wage or overtime laws, but instead upon things like contract law or state wage-payment statutes requiring employers to pay what they say they will.  For example, some courts have said that an employer's meal-break policy could be interpreted to mean that employees are contractually entitled to pay for unworked meal periods, even though a wage-hour law would not require this.

Cases like these typically allege that management has failed to do something it said it would do or has done something different from what it committed to do.  Also, employees often try to exploit ambiguities, vagueness, or inconsistencies in compensation plans or policies in making their allegations.  It is not unusual for them to contend after-the-fact that words or phrases meant something different from what the employer believed everyone understood them to mean.

Employers should think carefully about what they are saying in documents that cover compensation matters or that could arguably affect employees' pay.  Management should be sure that these materials say things as clearly and as accurately as possible, and that they neither say nor imply anything different from what the employer intends.  These documents should be drafted to give the employer maximum control and flexibility, including with respect to the interpretation of the terms used.  This doesn't mean that pay documents have to be "lawyered-up"; being clear and accurate does not necessarily translate to being longer and more-complicated.