Know the Law on Overtime Pay...

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Know the Law on Overtime Pay

Experts estimate that over 70% of businesses doing less than $200 million in sales in some way violate the Federal Wage and Hour Law. In my consulting practice, I am amazed at how frequently I find that clients are unknowingly setting themselves up for potential lawsuits.

(See Chapter 10 in my new book, 30 Ways Managers Shoot Themselves in the Foot for more information on Compensation Opportunities in your business. See Shopping Cart at $21.95 + $6 S&H.)

Liability for overtime that should have been paid, but wasn?t, can extend as far back as three years and can amount to big bucks if very many employees are involved. Typically, the issue of overtime arises when an employee is terminated and goes to a lawyer to determine the possibility of filing a wrongful dismissal lawsuit. If there are no grounds for such a lawsuit, an aggressive lawyer may decide to file for overtime violations if the attorney?s research determines that any were committed.

The law requires employers to pay non exempt workers overtime pay for all hours worked over 40 in any given week.. To be exempt as an executive or manager -- that is, exempt from this law -- an employee?s ?primary duty? must be managing as opposed to doing manual, inside sales or other non executive tasks. This means that the person must spend more than 50% of his or her time on managerial duties. The person must also regularly direct the work of at least two other full-time employees or their equivalent.

In other words, the person could supervise four people working 20-hour weeks. He or she must also have the authority to hire or fire other employees and regularly exercise discretionary decision making.

In addition, the exempt employee must be paid a salary of no less than $___ per week. (Check with your labor lawyer to determine the exact amount in your state.)

The biggest problem occurs with supervisory workers whom employers consider to be exempt because they think that these employees are managers. But often their duties are split. One week, one of these workers may function as a manager. But the following week, the person might be performing a sales or routine office function.

Rule #1 ? Be sure to have on file a job description for every exempt employee on your payroll. The job description should accurately describe the employee?s duties. This will provide some protection if the person later sues for overtime on the grounds that he or she was not an exempt managerial employee.

Rule #2 ? All non exempt workers should sign a time sheet even if they are not allowed to work in excess of 40 hours a week. If employees are required to sign in and out every time they report for and leave work, it will help reduce the company?s liability in future overtime disputes. And of course, these signed time sheets should be kept on file in case you need access to them down the road.

If you question whether one or more of your employees qualify for exempt status, you may wish to contact a wage and hour consultant.

Bill Lee is author of 30 Ways Managers Shoot Themselves in the Foot - $21.95 + $6 S&H for the first book and $1 for each additional book. See Shopping Cart at

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* Government Statistics on Legal Verdicts and Jury Awards - $ U.S. district courts terminated approximately 512,000 civil cases during fiscal years 2002-03. Nearly 20% or 98,786 of these cases were torts in which plaintiffs claimed injury, loss, or damage from a defendant’s negligent or intentional acts. $ Of the 98,786 tort cases terminated in U.S. district courts in 2002-03, about 2% or 1,647 cases were decided by a bench or jury trial. $ An estimated 9 out of 10 tort trials involved personal injury issues C most frequently, product liability, motor vehicle (accident), marine, and medical malpractice cases. $ Juries decided about 71% of all tort cases brought to trial in U.S. district courts; judges adjudicated the remaining 29%. $ Plaintiffs won in 48% of tort trials terminated in U.S. district courts in 2002-03. Plaintiffs won less frequently in medical malpractice (37%) and product liability (34%) trials. $ Eighty-four percent of plaintiff winners received monetary damages with an estimated median award of $201,000. $ Plaintiffs won more often in bench (54%) than in jury (46%) tort trials. The estimated median damage awards were higher in jury ($244,000) than in bench ($150,000) tort trials. April 2006 - A Jury in New Jersey found last week that Vioxx significantly contributed to a 77-year-old man's heart attack awarded him $9 million in punitive damages yesterday, raising Merck & Co.'s liability in the case to $13.5 million and intensifying pressure on it to settle such lawsuits. Example of Personal Injury Case 2004 : Ford Explorer rollover-prone and roof not crash safe and worthy- CASE TYPE : Product Design Defect, Auto Truck Vehicle - SUV, Motor Vehicle – Rollover CASE : Buell-Wilson v. Ford Motor Co., San Diego Co., Calif., Super. Ct. GIC 800836 Los Angeles, Calif. JURY VERDICT: $369,000,000 (369 Millions Dolalrs 2005 - In what may be one of the biggest massive medical malpractice tort verdicts in the state of Texas, a state jury awarded $606 million - including a remarkable $ 600 million dollars in punitive damages - to the family of an 82-year-old patient who had cancer and then who died after receiving an overdose of chemotherapy drugs. 2005 - In the 9th big loss for Ford in SUV Explorer rollover cases, a Florida jury awarded $61.2 million to the parents of an 18-year-old boy who was killed in a 1997 (wrongful death & Product Defect and Product Liability Issues) Example of Personal Injury Lawyer Case 2004 : Dodge Caravan seatback collapsed on baby in a car-seat - CASE TYPE : Automobiles, Products Liability - Product Design Defect, Wrongful Death, Motor Vehicle - Rear-ender, Motor Vehicle - Passenger, Motor Vehicle - Minivan CASE : Flax v. DaimlerChrysler Corp., Davidson Co., Tenn., Cir. Ct. O2C-1288 JURY VERDICT : $105,500,000 (105 Million Dollars 2005 – Billion Dollar Verdicts - In one of 2005's largest verdicts to an individual plaintiff regarding financial fraud , a Florida jury ordered Morgan Stanley Broker Dealer to pay $1.45 billion to investor Ronald O. Perelman for defrauding him in the sale of his camping gear company - Coleman. 2005 - February, a prominent Houston law firm and a Texas bank were SMACKED and Beaten with a $65.5 million verdict in a highly complex estate planning case that involved major problems and conflicts of interest. (65 million dollar jury award) 2005 – 3 years after a jury acquitted a company in Florida of manslaughter and criminal charges, a Florida civil jury SLAMMED the outdoor advertiser with a $65 million jury award verdict for the shock and electrocution of a sixth-grade boy. Age Discrimination - In December, a Los Angeles California jury found that PrivatAir - an aviation company focusing on private airline services - wrongfully fired Captain Doyle D. Baker on the basis of his age, defaming him in the termination process and causing extreme emotional distress.

Punitive damages serve a number of important functions which—despite a few horror stories, which are themselves either apocryphal or overturned in the courts, the functions remain valid and in the public interest. Persons causing great harm—persons deliberately or with gross negligence causing great harm should not view paying damages as merely a cost of doing business, a cost that might fit neatly into a risk analysis of wrongdoing. That is what happened in the Ford Pinto case in which the cost of paying claims to victims of a known deadly hazard was deemed less than the cost to retool the assembly line, and thus the hazard was maintained knowing full well that further people—more people would be injured or killed. This is the purpose of punitive damages, to punish this kind of egregious wrongdoing, and to deter, to be a deterrent to such conduct. It is not immediately clear why a deterrent—or the necessity of the deterrent should bear any great relationship to the amount of actual damages in a given case. There is nothing wrong and indeed something highly desirable in maintaining this disincentive to wrongdoing in an appropriate relationship to the harm and the conduct of the tort-feasor. This trend has led one commentator to suggest that ''[p]unitive damages have replaced baseball as our national sport.'' Theodore B. Olson, Rule of Law: The Dangerous National Sport of Punitive Damages, Wall St. J., Oct. 5, 1994, at A17. See also Malcolm E. Wheeler, A Proposal for Further Common Law Development of the Use of Punitive Damages in Modern Products Liability Litigation, 40 Ala. L. Rev. 919, 919 (1989) (''Today, hardly a month goes by without a multimillion-dollar punitive damages verdict in a product liability case.'').  


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