How to Avoid 3 Common FLSA Errors

Misunderstandings around FLSA law are common and the penalties are real and potentially damaging to a hospital's finances, reputation, and retention efforts, a legal expert advises.

Everybody makes mistakes—but when those mistakes involve the Fair Labor Standards Act (FLSA), a mistake can be ruinous, destroying both finances and employee trust.

Unfortunately, FLSA errors are easy mistakes to make.

FLSA errors are especially expensive for hospitals, says Thomas Shorter, a healthcare and employment attorney and shareholder at Godfrey and Kahn, S.C.

Just ask St. Mary's Hospital in Madison, WI. A nurse who had been terminated filed a suit citing the hospital's practice of asking nurses to stay within an area where they could hear a PA system during their meal breaks.

St. Mary's was found guilty of violating FLSA law by not allowing nurses a period where they were relieved of all duties. It agreed to pay $3.5 million dollars to settle a class action lawsuit for failing to pay 1,400 nurses for meal breaks when they had to stay on call.  

"Large organizations have a large potential pool of employees, who in turn have a lot of hours for which they are entitled to overtime payments," says Shorter.

"Healthcare employers tend to be big, with many people working for them. If you, for example, misclassify whole set of employees [as exempt] in a healthcare setting, then you're going to have big problem on your hands," he says.

Here are a few common FLSA mix-ups and tips on how to prevent them.

1. Exempt Vs. Non-Exempt
The most common mistakes involve misclassification of employees as exempt, says Shorter. Many people mistakenly believe that anyone paid a salary or in a supervisory role is exempt and does not need to be paid overtime for hours worked in excess of forty per week. This, however, is false.

"This happens more frequently than anyone in HR probably realizes, and certainly more often than gets litigated," Shorter says. But ignorance is not an excuse and neither the DOL, nor the courts will be sympathetic.

"When the DOL comes in on cases, they will interview employees and ask them to describe what they do. If you can't fit their job descriptions within an actual exempt role, you've got an unpaid overtime problem on your hands—a big one," he says.

Sometimes, this confusion is exacerbated by changes to employees' responsibilities without any official documentation or HR involvement.

The best defense against roles morphing or the scope of an employee's job description changing unnoticed is to require periodical audits of all departments regarding each employee. Keep a copy of every employee's job description, and ensure that the job description actually matches the job.

2. Accidentally Off the Clock
It's not uncommon for hospital employees to log out for lunch or a break and to be suddenly summoned back to attend to an emergency, or to voluntarily rush back to help. It's understandable that in their haste, they might neglect to log back in to the timekeeping system.

This scenario happens frequently. And, almost as frequently, no one catches the error, says Shorter.

Another common time-tracking mistake is that some time clock systems automatically factor a 30-minute meal break in to an eight hour shift—but not all employees know this. If an employee logs out for a 30-minute meal break, he or she is accidentally taking an additional half-hour out of their time worked.

"It ends up creating a significant issue where [employees] have a bunch of time they don't get compensated for," says Shorter.

Regardless of whether this is the employee's error or not, the employer is responsible for paying for the hours worked. It's important to keep an eye out for anything that looks odd—like someone logging out, then logging back in 30 minutes later if the system automatically deducts a break, or any other odd patterns that don't match up with typical schedules.

Additionally, make sure that payroll coordinators and managers in each department understand how the time clock system works and can explain to employees how to use it correctly.

3. The Myth of Comp Time
An employee in accounting stayed an extra four hours last night to crunch numbers for a special project. Since he's a non-exempt employee, he has to be compensated for the extra time he spent working. Why not offer him comp time and tell him he can leave at noon on Friday?

Because it's illegal, that's why.

"There's a very limited exemption for certain government entities that allow comp time, but if your organization is not a government entity—like, if you're a hospital system—attempting to do this will create significant problems," says Shorter.

While many organizations erroneously allow employees to take comp time to even out the hours they've worked, it is technically illegal. "If an employee had a workweek where they worked over 40 hours, they are entitled to overtime compensation for that time under the FLSA. Comp time is a myth—it's never been applied to the private sector," says Shorter.

FSLA law can be confusing, even for the most experienced HR pros. But making sure that the HR team is up-to-date and well-versed on the topic is one of the best ways to keep your hospital out of the papers and the court room, while keeping your workforce engaged and loyal.