The Top Ten Issues Discovered During an FLSA / Who Gets OT Audit

The team of HR Experts at OperationsInc has conducted hundreds of Audits for clients over the years to help examine who is eligible for overtime (OT), and how the client is addressing employee classifications. The Fair Labor Standards Act (FLSA) determines who gets OT and who does not, NOT the employer. Further nuances in the law dictate how to calculate the time to be paid, and even in cases of certain states (like CA) when OT is earned. It is very common for employers to incorrectly classify, and therefore incorrectly compensate, their employees resulting in the potential for fines and some huge payments to current and former employees for failure to properly pay them.

Here are the Top Ten Issues we have discovered during FLSA audits:

The employer thinks OT is “their call”.

The employer believes that who is eligible for OT is a decision they get to make at their sole discretion. This is not the case.

PTO is not accounted for.

The company pays those eligible 1.5 times the hourly rate for ALL hours over 40 reported in a week. The law allows for you to pay straight time for some of the hours when the 40 hours includes the use of accrued time off (e.g. Sick, Vacation, Personal, Holiday, PTO).

No one qualifies for OT.

The company has classified all of its workers as exempt employees, with no one qualified for overtime payments.

Executive Assistants / Administrative Assistants are classified as Exempt.

Workers who fall into the sometimes “gray” assistant level are mistakenly classified as exempt when they should be paid hourly and be classified as non-exempt.

Timesheets are pointing to OT.

Everyone is providing the company with a detailed timesheet, yet most / none are getting overtime.

Overtime is being improperly calculated.

The company ignores state specific laws that require OT to be paid after 8 hours worked in a day vs. 40 in a week.

Hours are left unaccounted for.

The employer neglects to include all time / track all time worked.

Bonuses paid in lieu of OT.

The employer mistakenly views bonus payments or “comp time” as a way to compensate non-exempts for OT worked.

“Opt-outs” are in place.

Employees have chosen to opt-out of getting paid OT, and even have done so in writing, which is both illegal and legally unenforceable.

Improper use of 1099s.

Employer has classified some as Independent Contractors / “1099s”, when the IRS and DOL guidelines dictate they are in fact employees.

For more information about OperationsInc’s HR Services, please contact Meghan Hopkins, VP of HR Business Development at or (203) 956-2572.