Ask a Lawyer: Avoiding Risks with Hourly Pay and Overtime

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Ask a Lawyer is a recurring column where attorney Jason Pill answers questions from people who work in the climbing industry. Got a legal question that you’d like him to tackle about your gym, your employees, or anything else in the wide world of climbing?  Submit your legal question here.

QUESTION: “Most of the people on staff at my gym are hourly employees, so what do I need to know about overtime pay…and do I need to keep any records?”

PILL: While paying your employees for all hours worked seems like a straightforward concept, wage and hour lawsuits are some of the most frequently filed lawsuits across the country and many employers—including Fortune 100 companies—struggle with wage and hour compliance. That said, there are a few baseline concepts that every gym should know when it comes to paying hourly employees.

There Are National Standards

As a starting point, the Fair Labor Standards Act (“FLSA”) is the federal law that establishes a minimum wage, premium pay for overtime hours of non-supervisory employees, and protections for children who work. The FLSA applies in all states and to virtually every climbing gym. In addition to the FLSA, state pay laws also apply to employee pay. While most state laws parallel the FLSA with little distinction, some states provide much greater employee benefits and result in increased obligations upon the employer. California is perhaps the most notable example of a state that offers far greater employee benefits than the FLSA requires, and many other states require a minimum wage higher than the federal minimum of $7.25 (here’s an interactive map from the DOL tracking state minimum wage). Put simply, the FLSA is the floor and states can go up from there.

 

At its core, the FLSA requires employers to pay hourly employees a minimum wage for all hours worked plus overtime pay for hours worked in excess of 40 in a work week of at least one and one-half times their regular rates of pay (e.g., an employee who earns $10/hour and works 50 hours one week is entitled to receive 40 hours at $10/hour and 10 hours at $15/hour). Part of this analysis is the threshold issue of determining whether an employee is actually working or otherwise engaging in compensable time under the FLSA. For example, time spent commuting to work is not compensable. However, if an employee starts the day at one gym and then is directed to finish his or her shift at another gym, this time spent driving between gyms is compensable under the “all in a day’s work” concept.

Common Mistakes to Avoid

Problems arise when an employer fails to recognize and count certain hours worked as compensable hours. For instance, an employee who remains at the front desk while eating lunch and regularly meets with customers is working, even though the employer may consider this the employee’s “lunch break.” This time must be counted and paid as compensable hours worked because the employee has not been completely relieved of duty and is providing a benefit to the employer—i.e., greeting customers. Likewise, a gym must pay an employee even if the time spent working was not authorized (e.g., unapproved overtime). The gym can discipline the employee for not following the gym’s time-keeping policies, but still must pay the employee for the time spent working.

 

Along those lines, an employer also must pay its employees for all time that the employer “suffers or permits” employees to work. This is a common issue in many lawsuits and means that if an employer (e.g., a gym manager) actually knew or should have known that an employee has performed work for the employer, the employee must be compensated for all such work. If an employer knows or has reason to believe that the work is being performed, the employer must count the time as hours worked. Like it or not, the law was designed to protect employees and places much of the burden of compliance on the employer.

A Routesetter Scenario

Consider the following hypothetical example: Your gym pays one of its routesetters an hourly rate and has a policy banning off-the-clock work (as an aside, every gym should have this policy). The routesetter is scheduled to work until 5:00pm. At 5:00pm, the manager leaves for the day and notices that the routesetter still has two routes to complete. When the manager returns the next morning, the manager sees that the routesetter completed the two remaining routes last night but clocked out at 5:00pm in the gym’s timekeeping system. What are the gym’s payment obligations to the routesetter?

If your response is “none,” then you’re inviting a lawsuit. The gym has constructive knowledge of the routesetter working off the clock (through the manager). The gym now must talk with the routesetter to determine how late the routesetter stayed to complete the routes, and pay the routesetter accordingly. However, the gym is not without recourse and can discipline the routesetter for working off-the-clock and/or working unapproved overtime.

 

Keep Good Records

In addition to establishing a minimum wage and basic overtime requirements, an often-overlooked facet of the FLSA is the record-keeping requirements it imposes upon employers—including climbing gyms—to keep certain records tracking each employee’s hours worked and wages earned. The FLSA does not mandate a particular form for the records, but does require that the records include certain identifying information about the employee and data about the hours worked and the wages earned. And, not surprisingly, the law requires this information to be accurate, in the event an employer’s practices are ever subject to review by the United States Department of Labor (DOL) or a court. The complete list of required time and pay data can be found on the DOL’s website.

Climbing gyms, like all employers, must keep these records for at least three years. Some states may require that these records be kept for even longer periods of time due to lengthier statute of limitations for employees to bring wage-based claims. If you’re outsourcing your payroll to a vendor, they should be observing these record-keeping requirements, but you should confirm.

The FLSA and various state laws provide climbing gyms with flexibility in how they establish and carry out their payroll practices, but they contain many traps for the unwary. Climbing gyms must be mindful of the basic payroll policies and ensure whatever policies they implement are consistent with prevailing laws and are not exposing climbing gyms to unnecessary legal risks. So, when examining existing policies or implementing new policies, it is often helpful to consult an attorney to make sure everything is legally compliant. This small step may save a climbing gym the significant time and expense of having to later litigate the issue if the gym’s practices are challenged by the DOL or a disgruntled—and perhaps underpaid—employee.


Note: This recurring column offers general advice and is not intended to be used as direct legal counsel. Gym owners should consult a lawyer for their facility’s specific legal matters. Pill can be contacted directly here.