What You Don't Know Can Hurt

Question #1: Hourly vs. Salaried — What’s the Difference?
As remodelers, trade contractors or other service providers we would include in our answers, “You don’t have to pay overtime for over 40 hours.” Right? Yes, sometimes, BUT! The rules are misused and abused but if they aren’t followed the penalties can be career-ending! More later . . .

Question #2: What’s wrong with the daily time/job cost sheet shown?
Well, not much, just about $4,250 a year that you will owe the worker IF you don’t show that a 30-minute lunch break was taken during the day. Otherwise, starting at 8 a.m. and quitting at 4:30 p.m. is 8.5 hours and without lunch you would owe for 30 minutes of overtime. It would amount to over $4,000 per year for an $18 carpenter with burden and this would be for everyone whose time sheet doesn’t show a lunch break.

Question #3: Is it better to have people report to the job to start the day?
Abso-youbetchya-lutely. If you tell you crews to be at the office in the morning for assignment, be ready to pay them from the time they are told to report until they get to the job ready to start. There are some exceptions to this but be sure of yourself.

And Question #1, what’s the difference between an hourly and a salary pay? A lot of us think that being on salary means no overtime; for that to be true, the employee needs to be what is called “exempt.” The exemptions are well defined and straightforward as Executive, Administrative, Professional and Outside Sales. The details of each can be found on the U.S. Department of Labor Web site, (http://www.dol.gov/csa/regs/compliance/whd/whdfs17.htm) or from the Web site www.dol.gov/esa, look for “FairPay Fact sheet by Exemption Under the Fair Labor Standards Act.

The most apropos exemption for our industry is Administrative. To be exempt as Administrative, they must meet ALL of the following tests: 1) be compensated on a salary at not less than $455 per week; 2) their primary duty must be the performance of office or nonmanual work related to the management of general business operations of the employer or the employers’ customers and; 3) their primary duty includes the exercise of discretion and independent judgment with respect to matters of significance.

Many medium to large remodeling companies I know can qualify a field supervisor or project manager. Many of the smaller companies with whom I am familiar, the field manager who wears tools, probably will not qualify. Check it out.

If you treat someone as exempt (no overtime) and you are audited, the Wage and Hour Division (DOL) will go back at least two years; use their judgment based on interviews with all of your employees and can determine that you should have paid time and a half for the number of hours they (not you) decide are due. They will determine the rate and you will also owe the FICA, Medicare and unemployment insurance amounts and in all likelihood, workers’ compensation as well.

A complaint can trigger an audit or Wage and Hour can select you at random. My company received a complaint; a former employee told Wage and Hour I made them show up at 7:40 a.m. but only started paying them as of 8. We won but after having spent some 15 hours of company time and a couple thousand dollars with our labor attorney — and we were prepared. Had the DOL been able to prove the allegation, I would have owed 20 minutes of overtime at an average of $15 per hour for 10 people for two years. That’s over $33,000 plus FICA, unemployment compensation and penalties, and that’s just on the field people that I had at the time.

It is vital to check for compliance — do the research yourself or have your attorney give you a business physical. Consider inviting the Department of Labor to put on a seminar at your local HBA; they are happy to do so.

Just don’t do nothing; check it out, find out and fast. A deputy director of the Wage and Hour Division told me during an interview that they are somewhat targeting residential construction contractors for compliance, and that means US. While You’re Here . . .

M M “Mike” Weiss has been a full-service remodeler for over 25 years. As an instructor for the CGR and CAPs programs, he spends many weeks each year on the road teaching other remodelers. He is also a past chairman of the Remodelors Council of the NAHB.

And while you’re here . . .Agree? Disagree? Want to know more or even argue? Send me an e-mail with your ideas or suggested topics, we’ll think about them and see what we can do. Mike@WeissRCMI.com