Learn the Basic Tests  For Exceptions to the Law

A long time ago — say, 60 years or so — managers managed and the rank and file did the work. It was the way of the Industrial Age and the federal government came up with laws aimed at shielding employees from working long hours for inadequate pay. Thus, the Fair Labor Standards Act was born in 1938.

Fast forward to the beginning of the 21^st century. We find ourselves in the Information Age, an era when labor laws lead to confusion and misinterpretation. This has increasingly drawn the battle lines between employers trying to cut costs and employees who say they've had enough. Don't expect a replay of the Haymarket Massacre, but your company could face legal action and the settlements could cost a small fortune

Even if your business is so small and local that it doesn't fall within federal guidelines, you may be subject to your state's minimum wage law. Some cities and counties also impose wage standards.

A Legal Snapshot     The Fair Labor Standards Act generally requires covered employers to pay nonexempt employees not less than one and one-half times their regular hourly pay for every hour beyond 40 in one workweek. The law defines a workweek as a regularly recurring period of 168 hours during seven consecutive 24-hour periods.     The workweek for temporary employees begins at 12:01 a.m. Monday and ends at midnight the following Sunday. The only temporary employees ineligible for overtime are licensed attorneys who are actually doing attorney level work.     Companies can be charged with willful or repeated violations of overtime or minimum wage rules and receive fines per employee.

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The flip side of the coin, of course, is employees who think overtime is an entitlement. They buy a new car and think they can just rack up the overtime to make the payments — sometimes at the expense of efficiency during standard working hours and certainly at a cost to your bottom line.

Generally, under federal law, the only people who are exempt from overtime pay are certain salaried employees who supervise two or more people, perform management functions, make strategic decisions, and possess hiring and firing authority or influence.

But in the Information Age, it’s not uncommon for executives to be hooked up to a computer, writing their own letters and e-mails, and answering their own voice mail messages. As more technology emerges to help manage the workday, the number of actual supervisors is dwindling. And with that comes confusion about who is a manager.

In a number of highly publicized class action suits in recent years, employees claimed they were classified as being exempt from receiving overtime pay when they were entitled to it. For instance, Rite Aid, Taco Bell and U-Haul all settled multi-million-dollar overtime lawsuits in 2001, although they admitted no wrongdoing.

To protect your company, it's important to define the primary duty of an employee. If your employees are called general managers, for example, and required to work a 60-hour week without overtime, they'd better be spending the majority of their time managing. Otherwise, you could be legally vulnerable.

Classifying employees as managers can help keep down payroll costs, as long as the title is justified by the actual job. But keep in mind that some court judgments against companies with misclassified employees have ordered the payment of up to four years of back overtime – plus damages. If an employee files a complaint, your business could be subject to an investigation by the Department of Labor. Add litigation costs to the mix and it'll quickly become clear that the strategy of saving overtime pay isn’t necessarily a money saver.

Next, review your management job descriptions to make sure they comply with federal (or local) requirements. If you're paying management salaries for supervisory work, you're likely in the clear. If not, consider reclassifying and paying overtime.