Pay Methods Overview
One area of wage and hour law that many employers disregard is the manner in which they pay their employees. There are basic federal rules that govern the ways your boss or company is allowed to pay you for the work you’ve done. Your employer’s failure to comply with the law could violate your rights and cheat you out of the compensation you’ve earned. Have questions about the pay methods your employer is using? It’s time to connect with The Lore Law Firm for a free and confidential case review.
Basic Obligations of All Employers
No matter the way in which your employer has chosen to compensate you, state and federal laws require that you be paid for all hours worked. Employers must pay at least the federal minimum wage, and a higher wage if set by state law. Employers must also pay non-exempt workers overtime, which is time and a half (or 1.5 times the regular pay rate) for every hour over 40 in a seven-day workweek. “Hours worked” generally includes all time spent actually performing job duties, plus time spent on call or waiting for work.
An employer must pay you promptly, either in cash (including direct deposit) or by way of a negotiable instrument, such as a check. “Promptly” generally means at the end of the current pay period. Employers cannot refuse to pay you and can only make legally permissible deductions from your pay (see below).
Acceptable Rates of Pay
There are different frequencies or rates of payment that employers can use to compensate their employees. Some examples include:
Many workers are paid by the hour, but they must be paid for all hours and fractions of hours worked. For instance, if you only work twenty minutes of one hour, your employer cannot round the twenty minutes down to zero and deprive you of payment. Minimum wage and overtime rules also apply (e.g. you must be paid time and a half for all hours over 40 in a given week).
Salaried workers are paid the same amount each week, regardless of how many days or hours per week they work. Even if salaried, you may still be entitled to overtime pay, which is an area that many employers get wrong. The way that you are paid does not alone determine whether you are entitled to overtime. Rather, your job duties must also be considered to determine whether you fall under overtime rules.
A day rate worker is paid a flat rate per day, regardless of the number of hours worked. This method of pay is common in heavy industry, inspection, and oil and energy field service work. But as with salary, a worker can still be entitled to overtime pay. Whether you are so entitled will depend on your day rate, the number of days worked in a week, and the number of hours worked.
A commissioned employee is paid a percentage of sales or services without regard to hours worked. However, this method does not necessarily exempt a worker from the right to overtime. In fact, many employees lose money because their employers failed to pay the required overtime. Your entitlement to overtime can be more complicated if you are paid hourly plus commission.
Other forms of payment
Employers are generally free to structure their employee payments as they see fit, provided they comply with state and federal laws. Some common examples include:
- 1099 payments (independent contractor)
- Flag rate
- Piece rate
- Payment for meals and lodging
It is imperative that you understand your rights to a minimum wage and overtime if you are being paid by one of these alternative methods. Employers cannot evade their legal duties to comply with wage and hour laws simply by using a less common method. If you have questions, check with our team by completing our free and confidential intake form.
Cash, Direct Deposit, and Check
Cash payments to employees are perfectly legal, but there are a few things employees should know about them. First, your employer is required by law to take out certain deductions for taxes, Social Security, and other items. This is the same rule if your employer paid you by check or direct deposit.
One issue that arises with cash payments is that employers sometimes fail to keep accurate records related to payment, which is required by law. This can be the result of an honest oversight or an attempt to evade tax laws by paying an employee “under the table.” Although the Fair Labor Standards Act (FLSA) does not require an employer to provide a worker with pay stubs, the laws in your state might. These are important records you should keep for tax and other purposes.
Direct deposit is a commonly accepted method of payment, but there are rules attached to it. Direct deposit is allowable as long as employees have the option of receiving payment by cash or check directly from the employer. As with any other wage and hour matter, the laws in your state may provide even stronger protections.
An employer can make direct deposit payments mandatory, provided the employer does one of the following:
- Allow the employee to choose the bank to access his or her direct deposit; or
- Choose the bank the employee must access his or her direct deposit from, but also offer the employer another payment option (e.g., cash or check)
If an employer chooses to pay by (paper) check, the funds must be available on demand. If they are not, then the employee has not been paid. This is an issue when companies have insufficient funds in their bank accounts.
Which Deductions Can My Employer Make?
Every worker knows that deductions are made from their pay, but they may not understand which ones are permitted. Some employers illegally deduct pay from their workers and thereby violate their rights.
Mandatory deductions include items like state and federal income taxes, FICA taxes, and wage garnishments. Employees can also choose to have money deducted for other items like life insurance and retirement plans. Voluntary deductions must be authorized by the employee and be for the employee’s benefit (not the employer’s).
Reach Out to The Lore Law Firm
The last thing you want to do as an employee is to not be paid fairly, fully, and on time. Even if you are not sure whether your rights have been violated, it’s worth checking with an experienced wage and hour attorney. You can have us review your case confidentially by filling out our free intake form. Reach out to us today.