The On-Line Experiment Part III: Overtime

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My legal experiment continues with the on-line employment contract that I purchased through lawdepot.com. I am continuing to post about the different provisions that I found objectionable in the agreement. A couple, including this one, as downright illegal, while others are just bad business advice. This one deals with overtime. Definitely a bad idea to include this in an agreement, at least in Minnesota.

Violation #1: Minnesota Overtime Provisions

In the section of “Employee Compensation,” I found a curious provision about overtime. The contract states:

The employer agrees to permit a reasonable degree of flexibility in work hours. In cases where extra time is worked in a day or week, the employee agrees to take equivalent time off in place of overtime pay within three months, unless there is an express agreement to pay overtime rates.

First of all, not all employers want to or can provide flexibility in the work schedule. A receptionist has to be at work when the office opens or a factory worker when the plant opens. Stating that the employer will be flexible is a bad idea unless that is really the case. The risk is that someone would print up and use the document without really checking out whether all the provisions fit his specific situation and if that flexibility is not given, be liable under the agreement.

Second, according to this provision, an employer can choose when to pay overtime, can provide paid time off in lieu of overtime and only has to pay overtime if there is an express agreement to do so. That is a lawsuit waiting to happen. Like the agreement in general, it seems like a good deal unless you know better. Both the federal and state Fair Labor Standards Act (FLSA) allow an employer to grant time off at the rate of 1 ½ hours for each hour worked in lieu of overtime but only for public employees. Minnesota law states that the “state of Minnesota or a political subdivision” may do so, Minn. Stat. § 177.25, while federal law states that a “public agency which is a State, a political subdivision of a State, or an interstate governmental agency” may do so. 29 U.S.C. 207(o)(1). Private employers are prohibited from doing so. Instead, they must pay overtime, rather than grant time off. An employer who follows this provision of the lawdepot.com employment contract would be unwittingly led to believe that overtime doesn’t have to be paid and that time off can be granted instead. How sorry he would be when that lawsuit is filed for failure to pay overtime or when the Department of Labor comes knocking.

Another concern about this provision is that it makes no reference to when overtime is paid. Minnesota law establishes the right to overtime when an employee works more than 48 hours in a workweek and applies to all businesses (with the applicable exceptions), while the federal FLSA provides overtime when an employee works more than 40 hours in a workweek but only applies to businesses that have a gross annual revenue of more than $500,000 (with its many exceptions as well). It isn’t an option for an employer whether to pay according to Minnesota or federal law, and the site does not explain this, as an attorney would. In addition, no express agreement has to be in place to establish the right of an employee to earn overtime.

Furthermore, a similar concern regards exempt and non-exempt employees. Overtime is paid only to non-exempt employees. It is often complex and difficult to determine even for judges and lawyers which employees are exempt and which are non-exempt. There is often no clear-cut answer. The agreement does not bring up these important distinctions. Thus, an employer is left to choose whether it thinks a position is exempt, based on the job title and the employer’s perceptions of whether overtime should be paid, and to choose whether it should pay according to Minnesota or federal law. It doesn’t work that way. The laws state when whether state or federal law must be followed, or when an employee is entitled to overtime. Unless an employer is conscientious about researching its legal obligations, its risk unknowingly violating its employees’ rights by purchasing and using in its business the lawdepot.com document.

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Discussion

  1. Gavin Craig  March 11, 2010

    Good post. Unfortunately many employers don’t understand this area, and in fact some completely ignore overtime pay requirments. Some even try to classify employees as independant contractors, and that is a real problem.

    Talked to a company once that thought if they raised everyones pay by 20%, that would cover all the overtime, and they wonldn’t need to use time cards. The problem is that now the base pay is 20% higher for the calculation of overtime pay.

    Gavin Craig

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    • Karen Lundquist  March 11, 2010

      Yes, I agree that some employers don’t understand this area at all and make every effort to ignore it, as if it were a choice. I had a defendant in an overtime case state again and again “we pay according to Minnesota law” without any factual support for that declaration, as if it were a choice whether you can pay according to Minnesota or federal law. In this case, they had to pay according to federal law when it was shown that their revenue was more than $500,000 annually.

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