Wage and hour concerns in the private club. (Wages).

On the surface, wage hour regulations appear to be simple and uncomplicated--a specific rate per hour and time and one-half an employee's regular rate of pay for hours worked over 40 per week. However, audits conducted by U.S. Department of Labor (DOL) investigators indicate otherwise as each year employers are assessed over $400 million in back pay for violating minimum wage and overtime standards. In addition, during the past year a number of large and well-known companies have settled multi-million dollar overtime lawsuits brought by employees with their own attorneys.

Why do many independent businesses, including private clubs, find themselves confronted with tens of thousands of dollars in assessments when their business comes "under the gun" of an audit by a U.S. DOL investigator?

Unfortunately, too many employers are complacent and not familiar with the very strict requirements imposed upon their employment practices in the wage hour area.

Failure of an employer to realize what constitutes compensable hours of work, and the misclassification of salaried employees as managerial employees account for the vast majority of violations upon an audit by the U.S. DOL.

As one probably realizes, it is a rare exception to find employees appearing on the payroll records at rates less than the legal minimum. Although pay records may indicate all employees being paid at the legal minimum, substantial violations can still exist because an employer doesn't pay for all hours that may be viewed as compensable by a DOL investigator.

Any of these activities that are performed by one or more employees can be the basis for minimum wage and/or substantial overtime assessments, as a DOL investigation covers two or sometimes three years.

Salaried Employees and Overtime Pay

While the wage hour law does provide an exemption from overtime pay for some executive, administrative, and professional employees that meet very stringent tests, the single biggest cause of overtime violations for employers at private clubs is the salaried employee. Merely giving an employee an executive or managerial type job title and paying a weekly salary does not excuse an employer from paying overtime.

At a private club, the general manager and most other department heads will qualify as exempt managerial employees. A pastry chef, sous chef, assistant golf and tennis professional, and the assistant golf course superintendent, among others, will generally not qualify as exempt employees, regardless of how high a salary they receive.

Being aware of the potential problems of paying via a salary, a private club, many times with the approval of their attorney and/or CPA, establishes pay plans that involve the payment of wages for what DOL calls a "fixed work week" which supposedly includes "built-in" overtime.

During a U.S. DOL audit, interviews with employees and especially former employees generally reveal that employees are working varying hours and not the fixed number of hours that are mechanically shown on the payroll records. Presented with this information from personal interviews, the auditor views the entire pay plans as invalid and computes overtime assessments that can be very costly.

Hundreds of employers each year are required to pay "back pay" for precisely this type of violation. Furthermore, federal courts consistently support the DOL's position.

Salary for a Fluctuating Workweek

Because of increased investigative activity by the U.S. DOL, and especially the surge in lawsuits by employees who traditionally have been satisfied salaried employees, it would be wise for a club to consider paying quasi-managerial employees a salary for a fluctuating workweek and overtime at halftime.

Under the fluctuating work week method of pay, an employee is paid his/her salary each and every work week regardless of hours worked, be they over or under 40 hours per week. For the hours over 40, the overtime pay is computed at half time as in the following example. If a non-exempt employee such as a sous chef or assistant golf professional is salaried at $500 per week and works 50 hours, the employee's regular rate of pay is $10 per hour ($500/50 hours). Overtime due would be $10 x _ time x 10 hours = $50.00. Gross pay for the week: $550.00.

If this employee worked 58 hours in another workweek, the employee's regular rate would be $8.62 ($500/58 hours). Overtime due would be $8.62 x - time x 18 hours = $77.58. Gross pay for the week would be $577.58.

The payment of a salary plus half time for overtime is a very workable pay plan for employees who are not clearly exempt under the strict DOL regulations.

There are variations to this method of pay, which can make it more equitable to the employee while minimizing overtime expense.

Golf Pro--Employee or Independent Contractor?

Since a head golf professional generally performs service on a club's behalf for a salary or retainer, the head professional is viewed as an employee under the wage and hour regulations. Although the head professional is considered to be an employee by most governmental agencies, there is no law to prevent the head professional from operating the golf shop concession as an independent contractor or business owner with his own employees. In essence, the golf professional operates in a dual capacity; he is an employee for purposes of the retainer or salary and he is an independent contractor/business owner with respect to operating the golf shop.

If the head golf professional is not accurately recording all of the work time of his employees, especially teaching time and playing golf with members, there could be overtime violations and DOL would hold the club to be jointly liable for back pay.

Preventive Audits Pinpoint Potential Problems

A U.S. DOL investigation can be time consuming and very costly. Violations of the types discussed in this article can cost a club tens of thousands of dollars.

A preventive audit prior to any formal DOL investigation can be most effective. A few hours of prevention are worth a year of reparations.

Compensable Hours of Work

To avoid unnecessary back pay and penalties, a club should be vigilant to the following employment practices that could be viewed as violative.

* Duties undertaken by employees each day to "get ready" or to set up their work area prior to scheduled work time.

* "Volunteer" golf course rangers and starters who barter their labor for free golf.

* Work performed by employees who stay on beyond their regular scheduled quitting time to take care of a late departing member or to finish up paper work.

* Attendance at meetings during an employees' time off or before or after the employees' scheduled workday.

* Work performed by employees who work split shifts and who don't leave the premises for the few hours between shifts. Often to ease the boredom of off-duty time between shifts, employees perform various duties of their own volition or help out when asked by someone in management.

* Paying for scheduled work hours each day and week and ignoring actual hours worked.

* Playing golf or tennis with members.

* Giving golf or tennis lessons and not counting the time as hours worked.

* Working during a golf outing for a fixed sum of dollars.

* Working full time for the club and part time for the head professional.

* Docking employees for a meal period that is less than 30 minutes.

* Granting an employee's request to work overtime hours at straight time rates.

* Paying by the day or the job.

Gerald Stefanick is a wage and hour/business consultant in the club industry.