Welcome back to another week of the Small Business Legal Playbook! Play 7 is titled “Overtime.” In some sports, overtime means sudden death, and whoever scores next wins the game. In the NFL, whoever gets the ball first in overtime knows exactly what they need to do to win the game. If they score a touchdown, the game is over. Just like the NFL, making a mistake in overtime in regards to your business can mean game over, and a lawsuit that an employee can bring can put your small business on the losing side.
While it’s not sudden death, the penalties for not paying overtime to your workers when you’re required to, can feel like certain death for your small business’ bottom line.
We spoke in Play 5 of Employment Agreements. Employment agreements are important tools for every small business owner to have so that both the business and your workers understand what the terms and conditions are of their employment. How much they will be paid, when they are expected to work, what the code of conduct says about their behavior, etc. The employment agreement should also have a section about overtime, and whether your worker qualifies for overtime.
Why should there be a section about overtime? Because you don’t want your worker to turn around later and say they were entitled to overtime pay. You’ve probably saved money in case an emergency arose for your small business, not for a lawsuit.
So, let’s discuss our offensive strategies for overtime policies with your small business workers. First, it’s best to have a written policy on overtime so that you and your workers know what they will be getting paid, especially if they work overtime. Depending on the salary of your worker, they might be ineligible for overtime. Even so, it’s still best to put it in writing. That way your workers will know exactly where they stand. It will also let you decide how best to model your pay structure for your workers. It might be worth it to pay some workers more, so that you can have them work overtime without having to pay them for it, and others you might pay a lower salary and not have them work a minute of overtime unless necessary.
Now what about the defensive strategies? If a worker thinks that they are entitled to overtime, you should determine whether they’re correct. If they are, I strongly suggest that you pay your worker and settle their claim before they bring suit for unpaid wages, which will be much more expensive than simply paying your worker for the unpaid overtime.
That’s all for this week. I hope you enjoyed this week’s Play, and stay tuned for next week’s play from the Small Business Legal Playbook! Remember to subscribe and get each play sent to you directly! Until then, may your businesses continue to thrive and your football teams be victorious. Keep playing to win!
