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Why hotels are a DOL target

Hotels have been a specific target of the U.S. Department of Labor: Wage and Hour Division in Colorado in recent years.  On a national level, hotels have a high rate of investigation by the Wage and Hour Division and they are frequently found in violation of overtime law due to a variety of unique pay practices.

In fact, according to the U.S. DOL Data Enforcement website, hotels are the third most commonly investigated sector, only behind full service and limited service restaurants. Another reason for increased enforcement is that hotels employ a high percentage of what the WHD refers to as “vulnerable workers”. Federal labor enforcement agencies have been targeting industries that employ these workers because of their relative high risk of exploitation due to low pay and benefits, ignorance of rights under the law, and/or reluctance to exercise those rights. 

A hotel is subject to the FLSA if its annual sales volume exceeds $500,000 per year. Even if it does less than $500,000, some of its individual employees may be covered if they engage in interstate commerce activities like swiping credit cards or ordering goods from out of state. The State of Colorado’s labor laws found in the state Wage Order apply to all private sector employers in four main categories including retail and service.  

To stay out of trouble, remember these important nuggets of federal and state compliance information:

General Overtime: Overtime must be paid after 40 hours in a 7 day workweek regardless of the length of the pay period. State of Colorado labor law also requires overtime payment after 12 consecutive hours. Employees cannot waive their right to overtime pay. Overtime is an additional one half of an employee’s regular rate of pay calculated as follows: Total Pay / Total hours = regular rate.

Piece Rate Housekeepers: Housekeepers are often paid a piece rate instead of an hourly rate. For example, housekeepers are paid $4 per room and are expected to clean at least two rooms per hour.  This method of payment is legal but it doesn’t exempt these employees from minimum wage or overtime law.  Employers must pay these employees the additional one half of their regular rate of pay for all hours over 40 in a week. They must also check to make sure that employees have been paid at least the minimum wage for all of their hours. Employers must keep a record of hours worked for piece rate housekeepers just like they do for hourly rate employees.

Pre-shift working time for housekeepers: Housekeepers often gather cleaning supplies and attend morning meets prior to clocking in for the day.  That time is considered work time and must be paid. It’s important to have housekeepers clock in before performing any work related activities. Changing into a uniform upon arrival at work is usually not considered work time.

Automatic deductions for lunches: Be careful about automatically deducting a 30-minute lunch break from non-exempt employees’ time each day.  Hotel employees are often working on a tight schedule and may not be taking a full 30 minute break even though the full 30 minutes is being deducted. This can result in substantial overtime back wages.  Make sure that employees are taking their full 30 minutes or that they are clocking in and out for lunch on a time clock that doesn’t deduct for lunch breaks less than 30 minutes.

Bonuses and Commissions for Front Desk and Sales Employees: A common overtime violation occurs when employers fail to pay overtime on non-discretionary bonuses and commissions. Non-discretionary bonuses include attendance, safety, performance, and sales bonuses. The weekly amount of those bonuses must be included in the regular rate of pay that determines the overtime amount.

Uniform Deductions: Colorado labor law does not allow deductions from employees’ pay for the cost of uniforms.

Contracting with a temporary staffing agency:  Make sure that temp agencies pay their employees that work at your establishment in accordance with federal and state labor laws. The Wage and Hour Division will assert a joint employment relationship between a hotel and its staffing agency making both entities ultimately responsible for labor law compliance.

Misclassifying Employees as Salary Exempt: Hotels have a tendency to liberally apply salary exemptions. A salaried exempt employee is someone who meets certain job duty requirements and is paid a weekly salary of at least $455 per week. Employers do not have to pay overtime to these employees. However, paying an employee a salary does not make them salaried exempt.  They must also meet the specific job duty requirements set forth in the federal regulations.

For example, hotels often classify office workers as exempt under the administrative category. To meet this exemption, employees must use independent judgment and discretion with respect to matters of significance. Bookkeepers, office assistants, front desk attendants, certain types of “coordinators”, data entry employees, and many others do not meet this job requirement and should not be classified as exempt from overtime.

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Kalen Fraser

Kalen Fraser is the President/CEO of The Labor Brain Inc., a labor law consulting firm located in Fort Collins.  Ms. Fraser worked in the U.S. Department of Labor and conducted investigations on hundreds of companies to determine their compliance with federal labor laws including the Fair Labor Standards Act, Davis-Bacon Act, Service Contract Act, Family Medical Leave Act and the H2A and H2B guest worker programs.  She created The Labor Brain to respond to a growing need in the business community for expert guidance on how labor laws are enforced. She can be reached at kalen@laborbrain.com. More information on the The Labor Brain is available at www.laborbrain.com.

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