Smartphones Can Cause Overtime Pay – A Case For Employment Practices Liability Insurance

Facebooktwittergoogle_pluspinterestby feather

A case for employment practices liability insurance

In some situations, providing a smartphone to your employees can cause the employer to be liable for overtime pay. Employment Practices Liability Insurance can help protect you when your employees think you're not playing fair.

Employees fall into two primary categories when it comes to overtime pay, exempt and nonexempt employees. Exempt employees typically are managers and others that make well above minimum wage, and are paid a salary. They're expected to work more than 40 hours per week and (usually) well compensated for doing so. Nonexempt employees are often paid hourly, or if paid a salary, they're expected to work about 40 hours or less in any given week. If salary they're the rank-and-file workers that have limited management roles and when they do work over 40 hours in a week, expect to receive overtime pay.

The Fair Labors Standards Act (FLSA) governs which employees are eligible for overtime pay. It exempts professional, executive administrative and outside salespeople, since they usually earn higher incomes. However, since the salary floor hasn’t been updated in a long time, anyone making more than $455 a week, or $23,660 a year, now falls into the exempt category. If the Department of Labor updates the figures, as expected, some people earning up to $50,000 could be entitled to overtime pay. 

So what happens when you give a nonexempt employee a cell phone and expect the person to answer it and/or respond during times that they would otherwise not be working, at home for example? The City of Chicago and the rest of the nation are about to find out. Chicago gave police officers smartphones and expected them to answer communications while off duty. Last year (2014), some of the police officers filed suit against the City of Chicago for not paying overtime compensation. The Wall Street Journal interviewed people close to the matter and one of the police officer's concerns was that  “They know that if they file for overtime, their job in that elite unit is gone". Without knowing more, it does appear to me the city will have to cut a check. As a business owner, you don't want to place yourself in the same situation.

To prevent liability for overtime pay and penalties, employers need a written policy on after-hours communications for their employees, especially the nonexempt staff. Further, the policy should discuss what is and is not appropriate in terms of use and the types of information stored on the devices. This includes anti-virus software, apps that are allowed to be loaded, who else can use it (think family members), data encryption, password storage, and what to do if the device is lost or stolen. With so much information stored on smartphones, it's easy for the wrong person to get inside your complete network and cause irreparable harm. 

Your business most likely already has commercial liability and property insurance, but if you have employees, you should consider adding employment practices liability insurance if you don't already have it as an endorsement to your current coverage. Employment practices liability insurance can help protect your organization from overtime pay lawsuits. It pays legal defense and settlement costs for employment-related claims, which your business owner or commercial general liability policy exclude. 1 Reason Insurance can help you select an appropriate policy that will give you peace of mind and allow you to focus on your business growth and profitability. Our experts will also help you identify risks before they turn into claims, often saving business owners much more than the cost of employment practices insurance premiums.



Leave a Comment

Call and receive expert consulting or click below for quote
Button linked to quote page for commercial insurance quote