Is doing a projected hours payroll legal?

My boss goes on frequent business trips and refuses to let anyone else handle payroll while she is gone. She therefore pays her hourly employees ‘projected wages’. This means that she averages the hours worked in the past 3 months and sets their hours to that number for the weeks she’ll be absent from the office. She makes us reimburse the company for hours not worked and compensates us weeks late for hours worked over her projection. She doesn’t discuss her predetermined hour projection with us before submitting it which can create immense financial issues for that month if the number of hours is too low. Is this legal?

Asked on August 30, 2016 under Employment Labor Law, Massachusetts

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 4 years ago | Contributor

It is illegal: the law (e.g. the Fair Labor Standards Act, or FLSA) requires that employees be paid for hours *actually* worked. But if she does "true up" the hours within a few weeks, it's not entirely clear that it's worth taking legal action. Certainly, it would not be worth suing: you can only recover your actual losses, not for inconvenience, but if the pay is trued up, there are no losses. And filing a complaint with the department of labor could be disruptive to the business, which could, as a practical matter, harm it, to the employees' detriment. While what she is doing is illegal, since the actual harm is low, given that she later adjusts for actual hours worked, you have to consider whether taking action is warranted.


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