Avoiding the "Overtime" Tarbaby
by Robert B. Groseclose, Esq.

Consider, for example, the case of the office manager who also helps out staff members.  The wage and hour law defines and exempt supervisor as someone who works not more than 20% of the time at what might be termed "non-supervisor" functions.  This means that the "part time" supervisor is entitled to overtime compensation.  In order to be truly exempt from overtime, the "supervisor" must expend 80%-plus effort at supervisor functions.

The penalty part of the law is the "liquidated damages" section.  Persons not paid as required under the law are entitled to be premium equal in the amount to the omitted payment.  Therefore, if the 79%-of-the-time supervisor worked consistently 50 hours a week for a year on a "salary," the employer is liable for an additional payment computed as:

                10 hours per week (x) 52 weeks (x) 1 1/2 times the "hourly rate."

Calling an employee "salaried" does not make it so.  Under the Alaska Department of Labor regulations, in the absence of specific written language stating an hourly base, the "salary" is presumed to compensate for a 40 hour week.  The monthly salary is divided according to a 40-hour week to compute the "hourly rate" which is then the base for determining the overtime rate.

In our 79%-supervisor example, even with a $10 per hour base, the employer being tagged for overtime would be looking at an assessment of :

                               52 weeks at 10 hrs at $15/hour (i.e. 1.5 x $10)=       $7,800
                               Liquidated damages=                                                    $7,800

                               Total =                                                                            $15,600
      (Please note: this does not consider costs and fees of defense, or as might otherwise be awarded under court rule and statute)

Because of the 2-year statute of limitations on wage and hour claims, a practice which is not corrected until years later would still involve a minimum of two years computed damages.

The moral of the story is: get your payment computation correct the first time.  Avoid the surprise of miscalculation and the penalty which goes with it.  It can cripple and bankrupt a business.