Promotion or Pay Cut- You Decide!

I get calls from potential clients all the time about situations where they THINK they are being offered a promotion but the sneaky employer is actually disguising the promotion when it is in in fact, a pay cut.  Typically, I see this occur when an employee who is paid hourly but is also receiving overtime pay for hours over 40 is offered a “promotion” to another position that is salary BUT is exempt (not qualified for) from overtime.  Employers will often sneak some language into the new paperwork stating that the new position is exempt from overtime and you may miss this until after you have accepted the position.  The end result is that your pay has been cut and you didn’t even know it!  That is where state law comes into play.  The South Carolina Payment of Wages Act (“SCPOWA”) is one of my very favorite laws.  I have written extensively about it in the past. Employers screw up applying this law all the time.  Additionally, employers based out of other states but still doing business in South Carolina (and there are tons) often do not even know about it when they violate state law.  I have argued the SCPOWA in both South Carolina state and federal courts and it often provides you great leverage in your case.

SCPOWA does all kinds of things.  It covers situations where you are not being paid by your employer or where you are not issued your final paycheck after you quit or are terminated.  It also has all kinds of notification rules and record keeping requirements for employers.  The relevant part of the statute in the situation I am discussing today is the requirement that employers give you notification in WRITING at least SEVEN calendar days BEFORE the change in pay becomes effective, if it is going to decrease your salary.  Now, the loophole in the statute is that it also says that “this section does NOT apply to wage increases.”  Employers always argue that because it is a wage INCREASE (at least in your base pay without accounting for overtime) that they did NOT have to give you 7 days written prior notice.  Nice try!  I often create detailed graphs, spreadsheets, and charts showing how the alleged increase was actually a decrease (and therefore, triggering the written notification requirements), especially when you account for the overtime issue.

So what can you do if you are offered a promotion?  Before jumping up and down with excitement, sit down for at least a day and think about it.  Examine whether you were getting overtime before and whether you will still be permitted overtime with the new promotion.  If the answer is “no” then you need to crunch numbers to make sure that with the loss of overtime, you will still be making more money.  You can always turn the “promotion” down!

Common Overtime Myths

Overtime laws are somewhat confusing for the weary and many employees have misconceptions about whether or not they are entitled to overtime. The Fair Labor Standards Act (“FLSA”) is a federal law that governs minimum wage and overtime issues in the United States. Some states have their own version of the FLSA governing overtime and minimum wage and such state-specific laws provide for greater employee protection in most cases than does the FLSA. South Carolina does not have a state law governing overtime pay, so the FLSA is the whole story for South Carolinians when it comes to overtime.

Some common myths and misconceptions about overtime pay are:

Myth #1: You are not entitled to overtime if you are paid a salary

Perhaps the biggest overtime myth is that salaried employees are not entitled to overtime pay. There are certain statutory exemptions for employees under the FLSA that do require an employee to be paid a salary in order to fall under the exemption, but salary is only one part of a multi-prong test in these instances. If the other criteria for an exemption are not met, then the fact that an employee is paid on a salary alone will not keep the employee from being entitled to overtime. The fact of the matter is that while there are many hourly employees who are entitled to overtime, there are also many salaried employees who are entitled to overtime as well. If you are paid a salary, you are still entitled to overtime unless you meet all of the requirements for one of the exemptions under the FLSA and the other requirements for exemption are typically more difficult to meet than the salary requirement is.

Myth #2: Compensatory time can be given in lieu of overtime pay

Unless you are employed by a public employer, such as the local, state or federal government, your employer cannot give you compensatory time in lieu of overtime pay. Private employers cannot even give their non-exempt employees a choice between overtime pay or compensatory time off under the FLSA.

Myth #3: Time spent travelling for work does not count towards hours worked for purposes of calculating overtime

While time spent commuting to and from work is not considered part of the hours worked in calculating overtime pay, employee travel that is part of the normal workday, such as travel time to and from job sites or client meetings, is compensable work time and does count towards the calculation of total hours worked for purposes of calculating overtime.

While these three myths represent some of the more common misunderstandings in regards to overtime pay, there are many, many more. It pays for employees to understand exactly how overtime laws apply to their unique situations.

Supreme Court Holds that Employees Making Oral Complaints of FLSA Violations are Protected from Retaliation

The U.S. Supreme Court’s March 22, 2011 ruling in Kasten v. Saint-Gobain resolved a long-standing question of whether oral complaints are protected from the FLSA’s anti-retaliation provision, which prohibits employers from firing an employee because the “employee has filed any complaint… under or related to the Act.”  The Court held that FLSA complaints could in fact be “filed” verbally under the meaning of the statute and that a written complaint of an FLSA violation was not required in order for a complaining employee to be protected from retaliation.  The federal appellate circuits have come to different conclusions in this regard prior to the ruling, creating a split between circuits on the issue.

The FLSA requires employers to pay non-exempt employees one and a half times their regular rate of pay for all hours worked in excess of forty hours per week.  The FLSA’s anti-retaliation provision prohibits employers from terminating or taking other adverse employment action against an employee because he or she made a complaint of a violation of the Act.

In Kasten, the employee claimed that he had made several oral complaints to his supervisors that the company’s location of time clocks was illegal under the FLSA because it prevented him and other employees from being compensated for time spent handling their work gear.  The employee claimed that his employer terminated him for making such complaints and that the termination fell under the definition of retaliation under the FLSA.

The Supreme Court agreed, stating a complaint is “filed” for FLSA purposes when “a reasonable, objective person would have understood the employee to have put the employer on notice that the employee is asserting statutory rights under the Act.”  The Court went on to state that while the Act’s language does contemplate “some degree of formality” in the filing of a complaint, the intent and purpose of the Act is to protect employees from FLSA violations, as well as to protect them from being retaliated against for complaining about violations.

The ruling provides broader protection for employees who complain about FLSA violations, such as not being paid for overtime.