Employment Law Blog

News, trends and analysis in employment law and HR

Apr 09, 2015

No easy solutions for avoiding overtime pay

Q&AWage and Hour 

Question: We have two related companies with common ownership. Employees often work a shift with one company and then work a second shift with the other company. As long as the work for each company never goes over 40 hours per week, we don’t have to pay overtime, right?

Question: We have two related companies with common ownership. Employees often work a shift with one company and then work a second shift with the other company. As long as the work for each company never goes over 40 hours per week, we don’t have to pay overtime, right?

Answer: Wrong. Unless exempt, federal law requires employees to receive one and one half the regular rate of pay for hours worked over 40 in a workweek. Having employees clock in and out with two different companies (or two different time cards) does not necessarily prevent overtime where employees are working for organizations with the same ownership.

Those employees will probably be treated as employees entitled to overtime if it appears this arrangement was intended to avoid paying overtime. So, if they have only been paid at straight time, you could owe them money. If the Department of Labor or state agency determines this is done to deliberately avoid overtime, in addition to the unpaid overtime wages and penalties, you may also have to pay liquidated damages (doubling the amount owed).

Criminal penalties and seized shipments of manufactured goods are also possible repercussions. Make sure you are familiar with both state and federal wage and hour rules; you will be required to pay eligible employees under the rules that are most favorable to the employee. Federal law requires overtime after 40 hours in a workweek, while California and Oregon laws may require daily overtime.

Reach out to your Vigilant employment attorney to determine your best course of action moving forward.  For more information, please see our Legal Guide, “At a Glance: Overtime”.

Question: What if employees volunteer for the second shift?

Answer: Employees can “volunteer” to work overtime, but they still must be paid at one and one half times their regular rates for all hours worked.
Under the Fair Labor Standards Act (FLSA), if you are a private sector “for-profit” organization and you permit an individual to work, you must pay at least the applicable minimum wage and overtime for all work over 40 hours in a week.

As a general rule, private for-profit entities cannot have “volunteers” performing tasks related to their business, and even governments and non-profits cannot have employees “volunteer” to do their regular work duties without pay.

For more information on this topic, see our Legal Guide, “Compensation for Volunteers”.

Question: Can they be unpaid interns for their second shift?

Answer: No. In order to qualify as an unpaid internship program, the program must meet six criteria outlined by the Department of Labor:

(1) Even if the internship includes actual operations of the facility, it must be similar to training provided in an educational environment;
(2) It must be for the benefit of the intern;
(3) The intern cannot displace employees and must work under close supervision of the existing staff;
(4) The employer must derive no immediate advantage from the activities of the intern and, in fact, operations must be sometimes impeded;
(5) The intern is not necessarily entitled to a job at the conclusion of the internship; and
(6) The employer and the intern understand that the intern is not entitled to wages for the time spent as an intern.

Also, reference our Legal Guide, “Compensation for Students, Interns, and Learners”.

Question: Can the employees work as independent contractors for any work over 40 hours?

Answer: These are some pretty creative ideas to try get around the overtime laws, but once again the answer is no.

State laws vary, but California, Idaho, Montana, Oregon, and Washington are all examples of states that apply tests to determine if an individual is an independent contractor. California, Montana and Washington have partnered with the federal Department of Labor in the Misclassification Initiative to perform joint investigations of misclassified employees.

At the very least, the individuals must operate independent businesses and be free from direction and control in how they perform their work.

As discussed in an earlier blog, if you direct the shift and the type of work being performed, you are directing and controlling the work and they will not qualify as independent contractors. Get in touch with your Vigilant employment attorney today and reference our Legal Guide, “Independent Contractor or Employee?”.

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