Understanding the Fair Labor Standards Act (FLSA) is essential for employers to stay compliant and avoid costly mistakes. Yet even well-meaning practices like using a “working interview” or paying employees different rates for different types of work can trigger violations if not handled properly. Recent enforcement actions and Department of Labor guidance serve as reminders that missteps – especially around compensation during hiring or calculating overtime – can lead to serious consequences. This article highlights two real-world examples that underscore the importance of regularly reviewing your FLSA practices.
Does an Employer Have to Pay an Applicant for Interviewing for a Job?
Of course not one might say. But not so fast. Does your company use a “working interview” to select qualified employees? Some companies use this form of applicant screening. As the name suggests, a “working interview” has the applicant performing work or they have the employee attend training during the selection process.
A dental practice located in Nashville, Tennessee required its candidates to perform work in order to assess their skills during the interviewing process. The dental practice was found to have violated the Fair Labor Standards Act (FLSA) for not paying what the Wage and Hour Division clearly saw was hours worked under the law. At the end of the day, the dental practice payed out $50,000 in back pay and liquidated damages.
Employers should be very careful if they decide to “road test” an applicant’s qualifications by putting them to work for a period of time. If the employee is not compensated for this time, it may violate the Fair Labor Standards Act (FLSA).
Can an Employer Pay Different Rates of Pay to a Single Employee for Performing Different Work?
Yes, an employer can pay different rates for different work. Many employers do this. However how does an employer calculate the regular rate for overtime purposes legally?
According to a recent Department of Labor Opinion Letter (FLSA2018-28): First, the employer must ensure that the employee’s average hourly pay exceeds both federal and state minimum wage requirements for all hours worked. Employers need to check what their state’s minimum wage is. The Federal minimum wage is currently only $7.25/hr. But many states have increased their minimum wage above the federal level. Michigan’s current minimum wage is $12.48/hr.
Second, if overtime is worked in a week, the proper regular rate of pay must be calculated.
In the December 28th Opinion Letter an employer was a home health care provider that sent its aides to its client’s homes to provide care. It based any overtime work on a base rate of $10.00/hr. The employer calculated any overtime worked by this rate of pay regardless of how the actual worktime was performed. This rate was set by the employer to account for both work time and travel time during the work week.
The Department of Labor found that this plan may not always comply with the FLSA’s overtime requirements because an employer cannot assume an up-front or pre-set a regular rate of pay. It must calculate the correct rate of pay for each week by taking the hours of work (in this case providing in-home aid services) and doing a “mathematical computation.”
If the employee performed enough aide services at their regular aide rate of say $12.00/hr. and the employee worked 35 hours that week but traveled between homes for seven hours, the employer must calculate the regular rate by multiplying the $12/hr. rate by 35 hours to get total pay of $420 and dividing it by 40 hours, the standard legal workweek.
For calculation of the regular rate for overtime purposes, (remember, the employee actually worked 42 hours) the regular rate is calculated by dividing $420 by 40 hours to arrive at a “regular rate” of $10.50/hr.
This meets the federal minimum wage level, so it passes that requirement.
So, if the employer based overtime on just the “set” rate of $10/hr., this would underpay the employee’s overtime pay rate which should be $15.75/hr. ($10.50 multiplied by 1.5) not the $15/hr. rate that would result from multiplying $10/hr. multiplied by the 1.5 overtime rate.
Please keep in mind, Opinion Letter determinations are based exclusively on the facts presented by the requesting party and do not necessarily control as precedent for other similar or comparable fact situations.
ASE Connect
FLSA Training Courses: ASE offers classes around FLSA to help you remain compliant.
Source: “Working Interview Violated FLSA, DOL Says, HR Dive 12/18.2018.Opinion Letter FLSA2018-28 12/21/2018