Debunking Top Construction Employment Law Myths
By Robin I. Frank, Construction Executive
Owning and operating a successful construction company requires general contractors and subcontractors to comply with many employment laws and become aware of many employment law myths, particularly relating to overtime and minimum wage laws. While failure to comply can be expensive, there are steps contractors can take to avoid repercussions.
The federal overtime law applies to employers regardless of the number of employees. Moreover, employees cannot waive their right to overtime. In the unlikely event that a laborer, for example, signs a contract agreeing that he or she will not be paid overtime, that person can still sue for the unpaid overtime. In fact, employees sue employers for unpaid overtime or minimum wage violations more often than any other reason.
Many construction business owners wrongly assume that if an employee works overtime without advance approval, in violation of a written policy, they do not have to pay for it. This is not the case. If the company knows or has reason to know that the employee is working overtime, it is liable and must pay for that overtime. Disciplining the employee for violating the policy may be in order, but not paying is not an option.
In the overtime context, it is the employer’s obligation to keep and maintain accurate time records (a work schedule does not constitute an accurate time record). If any employee sues for overtime and the contractor does not have accurate time records, the law allows the employee to merely estimate the number of hours worked in the event of a lawsuit. Given how weather conditions alter crew schedules, it can be difficult to pin down the exact number. The law allows an employee to then simply state that he worked an average of “X” number of hours per week.
Moreover, if the employee recovers even one penny in unpaid overtime, the company more than likely will be required to pay double that amount as a penalty. The overtime law also requires the employer to pay the employee’s reasonable attorney’s fees if the employee wins. If the employer wins, those fees cannot be recouped.
Moreover, whether or not they are owners, individuals who have the authority to hire, fire, and set pay rates and/or work schedules can be held liable for unpaid overtime and minimum wages. Additionally, successor companies are often substituted in after the fact. So closing down the company or bankrupting it is not an effective solution.
Another problem area is misclassifying employees as exempt from the overtime laws, an issue that is not uncommon among the construction industry. Classifying employees as exempt does not guarantee that the law will see them as such. Paying an employee a salary or giving him the title of project manager does not mean the employee is not entitled to overtime. Being paid a salary simply changes how to calculate the overtime rate. The same goes for paying employees on a day rate. The fact that an employer pays a laborer a set amount per day or for a set number of hours has nothing to do with whether that employee is entitled to be paid overtime.
Likewise, only certain types of jobs are exempt from the overtime requirements. A project manager must be paid a minimum salary to be exempt; however, being paid a salary alone does not make the project manager exempt from the overtime law. Exemptions focus on the employee’s actual day-to-day job duties and responsibilities, and not the job title.
For example, there are many cases in which a project manager was found to not be exempt under the overtime and minimum wage laws. Given that most construction companies hire subcontractors to do a lot of the work, the project managers rarely supervise at least two full-time employees on a regular and consistent basis, which is one of several necessary factors to qualify for the executive exemption under the overtime laws.
As such, most construction companies try to claim the administrative exemption for their project managers. However, to properly be classified as exempt under this exemption, the project manager’s primary duty must involve the performance of office or non-manual work directly related to the management or general business operations of the company or their customers, and involve the exercise of discretion and independent judgment with respect to matters of significance. If the project manager’s day-to-day work involves the very product the company exists to provide—such as renovation services, or the construction of a building—and does not involve the running of the business or determining the course or policies, he may not properly be classified as exempt.
Courts have found project managers non-exempt where they were essentially “babysitting” the construction or renovation to ensure it was completed in a timely manner in compliance with well-accepted industry standards and the specifications set forth in the builders’ contracts. Duties involving ensuring that subcontractors received their work orders, retrieving correct materials from storage containers, completing the job as specified in the contract and work order and in compliance with specific standards tend to weigh more in favor of being non-exempt.
Likewise, project managers not involved in negotiating or executing contracts, creating work orders or developing applicable standards tend to toe the line toward non-exemption. And if a project manager’s job routinely and regularly involves manual labor, courts may be more inclined to find that the manager is not exempt, particularly where the manager did not perform duties directly related to the company’s financing, budgeting, accounting, auditing, research, employee benefits, taxes, insurance, advertising or computer technology.
Even if the project manager is responsible for coordinating and scheduling the work of subcontractors, ordering supplies, billing on the construction site, acting as the company’s representative on the construction site and inspecting the work of subcontractors, this does not render the manager exempt. Rather, courts have found that these same duties did not constitute work directly related to the management or general business operations of the contractor.
One of the biggest problem areas for construction businesses is knowing whether to pay for travel time and lunch breaks, and knowing when the work day starts and stops. Let’s say employees are required to come to the office or warehouse in the morning and drive in a company vehicle to the construction site. For purposes of calculating the total hours worked by the employee, the day begins when they climb in the truck and ends when the vehicle returns at the end of the day. If the employee does any work while at the office or warehouse before leaving or after coming back, then the work day starts and ends at that point in time.
On the other hand, if the employee is free to meet the rest of the crew at a community gate, building parking lot, or construction site, or can voluntarily catch a ride from the office, then they do not need to be paid for the travel time. The employee’s work day begins when he arrives at the jobsite.
Lastly, any breaks that last less than 20 minutes must be paid. Any breaks, such as lunch breaks, which last for more than 20 minutes do not have to be paid, as long as the employee is not doing any work during that time. That’s less likely to happen when a construction crew is trying to catch up following a day of inclement weather, so you can’t assume it happens every day. Therefore, construction business owners should not automatically deduct for lunch or other breaks. Many times, employees claim in court that they did not take a lunch break and deducted hours should have been paid.
The best thing a construction company or contractor can do to protect themselves is to maintain accurate time and pay records and consult with an attorney who is experienced in labor and employment law.