Special considerations for the summer workforce
Q. Bernie owns a southern New Hampshire landscaping business employing about 40 workers who work in season on residential and commercial sites throughout New England. He received notice that one of his employees has brought a wage claim at the Department of Labor seeking back pay for all of the overtime he has worked over the past three years. Bernie has been paying his workers straight time for each hour worked and is now concerned that he may be faced with a big bill for past due wages. Should he be concerned?
A. Bernie has every reason to be concerned about the possibility of owing a great deal of money to present and former employees as well as being hit with civil penalties, fines and interest charges.
Businesses must be careful to meet all of the requirements of an employer, even when operating only a few months per year. Workers who come to the area for even a short time are still employees for whom companies must maintain accurate time and payroll records and keep personnel files. There are also special considerations that sometimes come into play when operating a so-called seasonal business.Typically, under both state and federal law, employers are required to pay hourly or non-exempt employees at the rate of time and one half their regular rate of pay for each hour worked over 40 in one week. There are exceptions for certain businesses, but the rules under state and federal law are different, and this can be a confusing and perilous journey for a business.For instance, the state minimum wage law provides that overtime pay must be paid unless specific exceptions are met. One such exception is for employees of an amusement, seasonal or recreational establishment that either does not operate for more than seven months in any calendar year or its average receipts for any six months of the prior year were less than one-third of its average receipts for the other six months of the year.What employers need to keep in mind, however, is that the state law applies generally only to very small businesses – those that gross less than $500,000 per year and do no business in interstate commerce. (For example, an ice cream stand that sells local products or a small landscaping or service business that operates only during a certain season.)Larger businesses are required to comply with the Fair Labor Standards Act, or FLSA, which has different rules regarding which businesses are exempt from the overtime requirement. To be exempt under FLSA, the business must be an “amusement or recreational establishment” that does not operate for more than seven months in a calendar year and meet the one-third test referenced above.There is no specific “seasonal” exemption. Thus restaurants, hotels, gas stations and other establishments that might operate only during certain seasons of the year will often not be considered recreational or amusement businesses and will have to pay overtime unless they are so small that they do not meet the test for coverage under FLSA.Employers therefore need to analyze whether they are covered under state or federal law and then determine whether they meet the requirements for the exemption under that law. There are complicated tests for determining all aspects of the law, including calculating whether or not the $500,000 gross receipts threshold is met.The consequences of non-compliance can be severe. In addition to Bernie’s concern about back pay, he should be aware that both the state and federal departments of labor have the ability to assess civil penalties and charge interest. Worse yet, an inquiry into overtime issues could trigger an audit of the payroll and record-keeping practices of the company – a process which can be both intrusive and expensive. nhbrCharla Bizios Stevens, director and shareholder in the Employment Law Practice Group at the law firm of McLane, Graf, Raulerson & Middleton, is director-elect of the Society for Human Resource Management New Hampshire State Council. She can be reached at 603-628-1363 firstname.lastname@example.org.