Paying for overtime in straight time cash is illegal.
Reading through the USDOL press releases it appears that many companies have problems paying for overtime. Case after case show companies being fined for overtime violations and recordkeeping errors. At an average of about $250,000 per case, plus whatever the legal costs were, a lot of overtime could have been paid for without getting in trouble.
Under the table
One company in Southern California apparently tried to hide the fact they were not paying overtime at the required rate of time and a half. They would pay only a 40 hour straight time week and then pay for any hours over 40 by offering cash at the straight time rate. I imagine they thought that workers would be willing to accept that cash because they didn’t have to pay any taxes on the wages. The problem was, someone was not willing to be paid like that.
Missing the paperwork
As you can imagine the recordkeeping on these hours was also found to be lacking and that cost the company even more money. Of the $289,215 they had to pay I am sure the vast majority went to pay the fines levied by the USDOL as opposed to back wages to the 60 employees. Just not a wise business practice.
An additional problem they may have is the fact that they could probably be charged with tax evasion. They did not collect the payroll taxes on the “wages” paid in cash. I am pretty sure the IRS would not be happy about that.
Just don’t do it
Trying to come up with an alternative for paying overtime is just not worth it. While not all your employees are educated about wage and hour laws, there is likely to be one or two in your workgroup who have seen commercials by attorneys, or who have read an article online, that may then question your practice of not paying overtime. Plus, you are supposed to have the FLSA poster in your workplace that also tells them they are to be paid for working more than 40 hours in a week. Be a legal employer! It is not as expensive as you think and it is better for your reputation.
