Employee Access to Personnel Records Q&A

Find out when you have to give your employees access to their personnel files. Even if you are not required to provide access by law, you may find it good practice to do so. Q: Do we have to allow our employees (current and former) to look at and copy their employment records?

A: Personnel records are the property of the employer. Therefore, you generally have discretion over whether to give employees access to their personnel files, unless a state law, court, or other government agency requires access. Federal law does not require you to give employees access.

However, many organizations, as a good will gesture, allow current employees to see and even copy their records. This openness usually reduces employee mistrust and concern about the information in their files. If your files contain only objective and job-related information, their contents should not surprise the employee or unnecessarily create the basis for a legal claim.

Approximately 20 states (including California, Illinois, and Michigan) require you to give employees, and sometimes former employees, access to their records. These state laws generally allow a limited number of inspections per year. Typically, some files, like records pertaining to future promotion, third-party references, criminal investigations, and other sensitive information, may be excluded from inspection. In addition, these laws usually allow you to require written requests for access to the files. Some states also give employees the right to copy their records.

In addition to allowing current employees access, a few states give former employees the right to inspect their files. For example, in Illinois, former employees can review and copy their file for up to a year after termination. Still, many employers are concerned that the information may be used to support a legal claim against them and so prefer to deny access to former employees. Most employment law experts, also concerned about the indiscriminate release of information, advise against giving former employees access unless required by law.

Employees or former employees who sue their employer can usually get their personnel records, and even other employees' files, in the normal legal discovery process. For example, if a former employee files a discrimination claim in federal court, the court can order the employer to turn over all files related to the former employee and any similarly situated employees.

So, in establishing your records access policy, you need to address both your internal corporate operating philosophy and local legal requirements. But in doing so, remember that even if you limit access, you may still be compelled to disclose the information in a legal proceeding.

Learn more about employee privacy.

Do you know how vacation and shift differentials affect overtime pay, or if you can pay "comp time-off?"

Do you know how vacation and shift differentials affect overtime pay, or if you can pay "comp time-off?" Find out the answers to these and other tricky overtime questions. --------------------------------------------------------------------------------------------------------

In this article, you'll get the answers to five more overtime questions, including whether you can pay comp time-off instead of overtime, how vacation time and shift differentials affect overtime pay, whether employees can forgo overtime pay, and what state laws regulate overtime.

1. How do shift differentials affect overtime pay?

Extra pay for shift differentials and "dirty work" generally must be considered in calculating the employee's regular rate. (Shift differentials and "dirty work" pay are extra compensation provided for employees who regularly work unpopular shifts or less desirable jobs.) However, when the differential is at least one and one-half the employee's regular rate and is paid under a collective bargaining agreement that establishes certain hours as the regular work day, it may be excluded from the regular rate and also credited against the employer's overtime pay obligation.

2. Is a nonexempt employee entitled to overtime pay if the employee works a full 40-hour week and also takes a day of paid holiday, vacation, or sick leave?

Not unless the employee actually works more than 40 hours in the workweek. According to the FLSA, nonexempt employees must be paid overtime for all hours actually worked over 40 in a single workweek. Thus, in calculating actual working hours for a nonexempt employee, you do not have to count the paid time off in the overtime calculation if the employee did not perform any work during that period. (Note, however, that a limited number of states, such as Rhode Island, require payment of at least time and one-half for employees who work on certain holidays.)

Consider the following example. A nonexempt employee normally works Monday through Friday, eight hours a day. She receives a paid holiday and does not work on Monday. The employee then works Tuesday through Friday, eight hours a day, and is asked to work eight additional hours on Saturday. The employee's pay would be for a total of 48 straight-time hours (40 hours worked and 8 hours paid holiday). Since she actually worked only 40 hours, she would not receive any overtime pay.

As an aside, if you voluntarily pay a premium of time and one-half (the equivalent of overtime) for work on a holiday, weekend, or evening, you should be able to credit this extra compensation towards any overtime actually earned in the same week.

3. Can you give nonexempt employees compensatory (comp) time-off in lieu of paying them overtime?

Private employers may not give comp time-off in lieu of overtime. However, state and local governments can give nonexempt employees comp time-off at the rate of one and one-half hours for each hour of overtime worked, with certain defined limits.

4. Can employees volunteer to work overtime hours at straight-time pay?

No. It may seem like a "win-win" situation – your nonexempt employees would get extra pay for working additional hours, and you would get extra work without having to pay overtime rates. However, the FLSA specifically requires employers to pay nonexempt employees who work more than 40 hours in a single workweek at least one and one-half times their regular rate of pay for each hour worked over 40.

In interpreting the FLSA's requirements, the Supreme Court long ago (in Brooklyn Savings Bank v. O'Neil, 324 U.S. 697 (1945)) determined that employees cannot waive their rights to overtime compensation, and the signing of such an agreement does not have any force or effect. Therefore, you cannot pressure or allow your nonexempt employees to work any hours over 40 in a single workweek without paying them the overtime rate.

5. Do state laws have different overtime requirements?

Many states also regulate the payment of overtime to employees. Most states simply mirror the FLSA's requirements. For example, Illinois requires employers to pay nonexempt employees overtime at a rate of one and one-half times the regular rate for all hours worked in excess of 40 in a single workweek.

A few states, however, have more restrictive overtime requirements and require employers to pay overtime on a daily basis. For example, in addition to weekly overtime, California requires employers to pay daily overtime at the rate of one and one-half the regular rate of pay for all hours worked over eight in a single day and at double the regular rate of pay for all hours over 12 in a single day. California also requires that time and one-half be paid for the first eight hours worked on the seventh consecutive day of work, as well as double time for all hours over eight worked on that day.

And, at least one state limits the number of overtime hours employees may work. In Maine, employers may not require employees to work more than 80 hours of overtime in a two-week period, except for certain "essential services" employees.

Take Overtime Issues Seriously

The issue of the proper payment of overtime is probably one of the most contested areas under the FLSA, and many employers have more legal exposure than they realize. The DOL aggressively pursues wage and hour claims, and it collected over $165 million in back wages in fiscal year (FY) 2004, up 48% from just three years ago. In addition, recent court decisions have resulted in large adverse dollar judgments when nonexempt employees were not paid properly for all their overtime.

Given the successes of the DOL and plaintiffs' attorneys in pursuing wage and hour cases, you cannot afford to be complacent. So, take care and do not let one of the oldest employment laws on the books (circa 1938) sneak up on you.

Overtime Issues under the FLSA

Calculating overtime often is more complicated than just paying nonexempt employees for all hours worked over 40 in a week. You also have to consider any bonuses paid, how many jobs the employee worked, and whether the employee actually worked 40 hours. Find out in this and next week's E-Tips the answers to ten of the most common questions on overtime.

Most employers understand that the federal Fair Labor Standards Act
(FLSA) requires you to pay nonexempt employees overtime for all hours worked over 40 in a single workweek. ("Nonexempt" refers to all employees covered by the minimum wage and overtime requirements of the law, i.e. those that are not exempt from it.) But how do you determine the appropriate overtime pay rate for a nonexempt employee who works more than one job or is paid a salary (as opposed to hourly pay)?

Sorting through the wage and hour rules can be a formidable task even for seasoned HR professionals. To help you understand the FLSA's requirements, this and next week's E-Tips address ten of the most common questions regarding how to calculate overtime payments for nonexempt employees.

In this article issue, you'll find out how "regular rate of pay" is defined, whether you can average hours, how to pay salaried nonexempt employees, how to calculate overtime for two jobs, and how bonuses affect overtime pay calculation.

Next week, you'll learn whether you can pay comp time-off instead of overtime, how vacation time and shift differentials affect overtime pay, whether employees can forgo overtime pay, and what state laws regulate overtime.

1. How is overtime calculated in general and what is an employee's "regular rate" of pay?

The FLSA requires that every employee covered by the Act who works more than 40 hours in a single workweek must be paid at least one and one-half times that employee's "regular rate" for each hour over 40. The FLSA defines the "regular rate" as all remuneration for employment paid to or on behalf of the employee, although some items of compensation (such as certain bonus payments) do not have to be included in the calculation (see question 5, below). Thus, the employee's regular rate of pay per hour for the week must be calculated before the overtime rate can be determined.

2. When calculating overtime, can you consider the average number of
hours an employee works over several weeks?

Generally, no. The FLSA requires employers to pay overtime for all hours worked over 40 in a single workweek period, and the hours may not be averaged over two or more weeks. A workweek is defined as a fixed period of 168 hours or seven consecutive 24-hour days. So, if an employee works 30 hours one week and 50 hours the next, he must receive overtime compensation for the hours over 40 that he worked in the second week (even though the average number of hours for the two weeks is 40). This rule applies regardless of whether the employee is paid on a daily, weekly, biweekly, monthly, or other basis.

There are two exceptions to this rule. Hospitals and residential care facilities are permitted to establish a 14-day period in lieu of the seven- day workweek for purposes of computing overtime, if the affected employees agree. In addition, public agencies may elect to pay fire protection and law enforcement employees overtime after they have worked a set number of hours (212 hours for fire protection employees and 171 hours for law enforcement employees) per work period (defined as 28 consecutive days) instead of after 40 hours in a single workweek.

3. How do you calculate pay and overtime for a salaried, nonexempt employee?

For employees who are not paid a regular hourly rate (such as those whose compensation is determined on a salary, piece-rate, or commission basis), you must determine what their regular hourly rate would be based on their total compensation. The regular hourly rate is computed by dividing the salary by the number of hours the salary is intended to compensate.

For example, if an employee is hired at a salary of $400 and this salary is compensation for a regular workweek of 40 hours, the employee's regular rate of pay is $400 a week divided by 40 hours, or $10 an hour. If the employee works overtime, he is entitled to receive $10 for each of the first 40 hours and $15 (one and one-half times $10) for each hour thereafter.

4. How do you calculate overtime for a nonexempt employee who works two jobs with different pay rates?

The FLSA regulations specify two methods for determining an employee's overtime rate when he works two jobs at different pay rates. Typically, when working more than one job, the employee's regular rate of pay is calculated as the weighted average of the different rates.

For example, the regular rate of pay for an employee who works 35
hours per week at $15 per hour as a machine operator ($525), and
works 10 hours that same week at $7 per hour cutting the grass outside
the plant ($70), is $595 divided by 45 hours, or $13.22 per hour. Since you have already calculated the regular straight-time rate for 45 hours ($595), you then only owe the additional "half time" premium rate of $6.61 for each overtime hour worked, calculated as half of the weighted average of the two jobs ($13.22 divided by 2 equals $6.61). The overtime premium for the 5 hours worked over 40 in the week, therefore, would equal $33.05 (5 overtime hours x $6.61). Total pay for the week would be $628.05 ($595 straight time pay plus $33.05 overtime premium). The employee's regular and overtime rates may vary from week to week with the number of hours spent performing each job.

Alternatively, an employer and employee may agree, before the work is performed, that the overtime rate will be based on the regular rate that applies to the type of work performed during the hours in excess of 40. Therefore, if an employee spends 35 hours in a week working as a machine operator at $15 per hour, and five hours a week cutting the grass at $7 per hour, the overtime rate for any hours over 40 spent cutting the grass is $10.50 per hour ($7.00 times one and one-half). Conversely, the overtime rate for any hours over 40 spent working as a machine operator is $22.50 ($15.00 times one and one-half). This method of computation is available for hourly employees only and does not apply to nonexempt salaried employees.

5. How do bonuses and incentives affect overtime pay?

Bonuses and incentives that are dependent on hours worked, productivity, or efficiency must be included in determining an employee's "regular rate" of pay. For example, an hourly employee who earns $7 per hour in a 40-hour workweek has a "regular rate" of pay of $7 per hour and an overtime rate of $10.50 (one and one-half times $7). If that same employee received a $50 production bonus for that week, the employee's regular rate of pay would change to $8.25 per hour ($50 plus the regular weekly rate of $280, divided by 40 hours) and the overtime rate becomes $12.38 per hour for that week.

Under some bonus plans, the bonus is not paid weekly. In that case, the employer may disregard the bonus until the time when the bonus is actually determined and, in the meantime, may pay compensation for overtime at one and one-half times the employee's base hourly rate, exclusive of the bonus. When the amount of the bonus is properly calculated, it must be allocated over the period it covers, and a revised overtime rate then must be applied to any hours in excess of 40 that were worked during that period. The employee should receive additional compensation for each workweek including overtime during the period. The amount will be calculated based on the new overtime premium using the bonus, less the overtime premium previously paid. Other examples of bonuses or incentives that must be included in an employee's regular rate of pay are nondiscretionary bonuses paid according to a contract; efficiency bonuses for completing work in less than the allotted time; attendance bonuses; and bonuses paid to employees to work in undesirable locations.

Bonuses that do not have to be included in the regular rate of pay are those received on special occasions (such as Christmas) as a reward for service and which are not measured by, or dependent on, hours worked, productivity, or efficiency. In addition, premium pay for working on holidays, Saturdays, or Sundays does not have to be included in overtime calculations, if the amount is at least one and one-half times the employee's regular rate of pay.

Learn more about FLSA.