Can I Make All My Employees Managers To Avoid Overtime Pay; and Other Myths. Two Ways to Make Long Term Bad Decisions.
The Minnesota Labor and Employment law Blog has an interesting article on another large company failing to pay it’s employees for overtime work as required by the law. The company in this instance was Levi Strauss and Company. The end result cost them well over a million dollars and of course their incurred attorney fees. Most of these cases are arguments over classifications – is an employee exempt, or not. Companies have been found to classify employees as managers, even though they don’t manage much, to avoid the overtime requirement.
Several years ago a contractor approached me and asked if he could make all of his employees independent contractors, thereby avoiding the requirement to pay the employers portion of social security. His competitors, he told me, were all doing it. This is another bad idea that will eventually subject a company, and owners, to significant costs and penalties.
Companies are sometimes operating under significant cost pressures, and they are looking for ways to reduce costs. However, ignoring the law is not the solution to a cost problem. While a company ignoring the law might gain a slight cost advantage in the short run, the cost in the end is bound to be much higher.
In the Levi Strauss case, since the employer failed to pay the required overtime (at least they agreed to make payment to the tune of over a million dollars,) the employer will also have a significant payment due the government for their portion of the social security payment.
While I have not seen this case yet, I am sure that there are companies that are treating employees as independent contractors and failing to pay the employees the required overtime wages, and the employer is also failing to pay the employers portion of the social security payments. These employers are just as likely to be caught by the government as by an unhappy employee or ex-employee.
Follow the law, and life is easier in the long run. When in doubt, ask an attorney to review the situation and provide advise. It’s far less expensive to get good legal advice than to defend these charges in court. Thanks to the Minnesota Labor and Employment Law Blog for their article on Levi Strauss.
