As an employer, you set the policies for managing your small business and your employees. But you better make sure your payroll policies follow government rules. Otherwise, you may have to pay back wages and fines. Just ask Progressive Business Publications. The Pennsylvania company owes current and former employees about $1.75 million in back wages and damages for docking its employees’ pay for bathroom breaks.
Beginning in 2009, employees at Progressive’s 14 telemarketing centers were required to log off of the company’s computer system any time they wanted to leave their desks – even if the break was only for a few minutes to go to the bathroom or get a cup of coffee. According to the company’s written compensation policy, employees can take personal breaks at any time for any reason. However, personal break time is not paid, because the company believes it is a disadvantage for employees to take breaks.
The problem with this policy is that when workers had their pay docked, it often brought their wages below the federal minimum wage, according to the U.S. Department of Labor (DOL). The federal minimum wage for nonexempt employees is $7.25 per hour for all hours worked, plus time and a half for hours worked over 40 per week.
The DOL informed Progressive that its policy violated the Fair Labor Standards Act (FLSA) and told them they must pay their employees for breaks of 20 minutes or less. Additionally, the DOL found the company had violated FLSA documentation requirements since it couldn’t produce the log-on/log-off records from six of its 14 call centers for various times since the company’s policy had went into effect.
When Progressive didn’t comply with DOL requests, the DOL filed a lawsuit against the company, ordering it to pay 6,000 employees affected by its policy the back pay owed to them. Even though Progressive is fighting the ruling by saying the DOL is enforcing the wrong policy, the DOL is firm in its judgment that short breaks are compensable and Progressive must pay damages.
What can you learn from Progressive’s situation? As an employer, you need to make sure your company’s payroll policies comply with federal (and state) rules and regulations. Otherwise, you may have to pay hefty fines.
However, you may wonder, “How do I stay on top of all the regulations and any changes that may occur – AND run my business?” The answer many small business owners in the Indianapolis area have found is to outsource their payroll to The Payroll Department. Teresa Ray, owner of The Payroll Department, and her team can help your company stay in compliance with federal and state laws.
-Ariane of The Payroll Department Blog Team