Retro Pay - Overtime

dawnchyten · July 2008

I just started working for a company in MA that classified everyone as exempt. I have started an audit as there are clearly several positions that have been misclassified and need to be re-categorized as non-exempt. My question is - legally does the company have to pay retro pay once a position has been reclassified, and does it apply to only current employees or should it include employees that were terminated or left the company? I should mention that the company does not have a timekeeping system so in order to figure out retro pay I will have to take an average number of hours worked by job and then apply to the hire date. Any advice?

TXHRGuy · July 2008

What FLSA says is that you have to pay 1.5x the rate for time worked over 40 hours in a week for a non-exempt position. If your firm didn't do that, it violated FLSA. The grapevine of associated employees will likely ensure that past employees will begin to discover the compensation given to current employees, which means that a lot of people will come to understand that your company is acknowledging a FLSA violation. Those who don't get paid may go to DOL before they come to you.

I recommend you get ahold of a good employment law attorney who is experienced in this very issue to help you handle it correctly. There will not be a cheap or easy way out of it. Technically, the only way to come clean is to involve DOL, which most attorneys will advise against because once everyone is settled to their satisfaction, nobody calls DOL therefore no blood and no foul. Don't try to handle it without the DOL and without an attorney. Pick DOL+attorney or attorney+whatever-the-attorney-says but don't do it alone. Start with the attorney in my opinion.

tcfd21 · July 2008

I work for a company based in AZ. We just went through this same situation. We hired an HR Specialist that deals with this type of problem on a regular basis. She reviewed our payroll, advised us that we were in the wrong and dealt with DOL for us. By advising the DOL that we had found the error and were willing to make it right we avoided all penalties and fines. We were required to hire and outside auditor to calculate all the retro overtime. They required us to send them all payroll records for all employees, past and present, for the past (2) two years. It was time consuming and costly, but we actually saved money by admitting that we were in the wrong before we were reported by an employee. The DOL is willing to work with you if you acknowledge there may be a problem.

Retro Pay - Overtime

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