Most Massachusetts employers are now aware that, effective July 13, 2008, violations of the Massachusetts Wage Act carry mandatory treble damages. As an example, if an employer is found by a court to have failed to pay an employee for overtime or other wages owed, the employer will be ordered to pay the employee three times the amount owed, plus attorney’s fees and costs.

Unfortunately, the Mass. Wage Act and the federal Fair Labor Standards Act and their accompanying regulations are highly technical laws that carry many pitfalls for the unwary. Even employers who are conscientious about treating their employees fairly can run afoul of requirements of which they are unaware, potentially exposing both their companies and themselves to severe penalties. The purpose of this article is to alert small-business owners to some common mistakes employers make when attempting to implement the Massachusetts and federal wage-and-hour laws.

Salaried vs. Hourly Employees

Many employers make the mistake of paying certain supervisory employees and office staff a fixed salary (but not overtime) when, in fact, the employees are deemed non-exempt from minimum wage and overtime requirements. Frequently, paying an employee a fixed salary is seen as a benefit to the employee because it ensures a guaranteed wage even when the employer’s business is slow. However, unless an employee falls within one of the Fair Labor Standard Act’s exemptions for executive, administrative, professional, outside sales, computer, or certain other employees, he or she must be paid at least the minimum wage for every hour worked and receive overtime compensation.

These exemptions are not as straightforward as they appear. For example, while an employer may consider a working foreman to be a supervisor covered by the executive exemption, that employee will not qualify as exempt unless their primary duty is management and they have the authority to hire or fire other employees, or have particular weight given to their recommendations as to the hiring, firing, advancement, or promotion of other employees.

Employers who choose to pay non-exempt employees a salary may do so as long as they keep accurate records of hours worked and compensate employees appropriately. For example, a non-exempt employee who is paid a weekly salary for a 35-hour week must be paid overtime when they work more than 40 hours per week. Overtime is calculated at 1 1/2 times the regular rate (which is calculated by dividing the employee’s weekly pay by 35 hours). The employee is entitled to receive the regular rate for the first 40 hours worked and 1 1/2 times the regular rate for each hour worked thereafter.

Timekeeping

It is important that employers maintain accurate records showing total time worked in a given workweek. While a time clock is not required, employers should take steps to make sure that these records are accurate, and if a time sheet is used, each employee should be required to sign each week’s time sheet.

The accuracy of an employer’s records becomes crucially important when an employee alleges that he or she has been underpaid. If an employer cannot produce accurate records, the employee’s assertions may be presumed to be accurate if he or she can provide proof of hours worked. It then becomes the employer’s burden to provide evidence to rebut that presumption.

Federal regulations require 12 records that employers must maintain for each employee covered by the Fair Labor Standards Act. For example, in addition to the hours worked each day and the total hours worked each week, an employer must maintain the total straight-time wages due for the week, the total paid for overtime hours, the regular hourly rate of pay for the employee in any week when overtime is earned, and the total additions to or deductions from an employee’s wages, including employee purchases or wage assignments. Additionally, employers must also retain various types of records for specified periods.

Posters Are Important

It is essential that employers prominently display posters setting forth their employees’ rights under both Massachusetts and federal wage-and-hour laws in a location where employees regularly congregate, such as a break room, in the human resources department, or next to a time clock. The appropriate posters are available from the U.S. Department of Labor and the Mass. Attorney General’s Office. When an employer fails to post informational notices regarding payment of wages, the statute of limitations on Fair Labor Standards Act and Mass. Wage Act claims can be tolled, exposing employers to damages for a period of time greater than the normal two years under federal law and three years under the Mass. Wage Act.

Travel Time

Ordinary commuting time between an employee’s home and the employer’s place of business is, of course, not compensable. However, when an employer requires an employee to report to their place of business at the beginning of the day prior to heading to a job site, or at the end of the day, the time spent at the employer’s location is compensable, as is travel time to and from the job site. Any traveling that an employee is required or directed to do during the workday is also compensable.

Lunch

Under Massachusetts law, an employee must be given a 30- minute break after six hours of work. This break is generally unpaid. During this period, an employee must be relieved of all work-related duties. An employer who requires employees to remain on premises or otherwise restricts their movements while on break must treat the time as hours worked.

You May Be Personally Liable

Under the Mass. Wage Act, “the president and treasurer of a corporation and any officers or agents having the management of such corporation shall be deemed to be the employers of the employees of the corporation.” Principals of a corporation may be personally liable to employees for violations of the Wage Act, and an ‘officer or agent’ of a corporation who fails to pay required overtime can be personally subject to civil and criminal penalties.

As this partial list indicates, there are a host of issues that employers must be attentive to implementing state and federal wage-and-hour laws. While compliance can seem daunting, employers can usually identify and correct errors through a simple review of policies and practices. Most importantly, by establishing and implementing compliant policies, small-business owners can avoid the potentially crippling consequences of a wage-and-hour complaint.

This article is intended as a general summary only and does not constitute legal advice.

David S. Lawless is an associate with Springfield-based law firm Robinson Donovan; (413) 732-2301.