Quick Consultant: Avoid the Wage & Hour Trap

Most readers, at least those that like me, know that I have a good sense of humor. I try not to take myself too seriously. But before I delve into the subject of salaried employees and how many owners are violating the law, I feel compelled to pass on some comments on a story that recently received prominent attention in the news—the story of Bernard Madoff, the investment guru accused of running a $50 billion dollar Ponzi scheme.

Mr. Madoff, under a bail agreement, was placed under 24 hour house arrest at his apartment on the East Side of Manhattan. Poor soul! Federal authorities actually hired a team of security guards to watch his apartment building around the clock.

According to news accounts, the new restrictions on Mr. Madoff's movements appear aimed at protecting as well as confining him. In a letter delivered by hand to federal magistrate judge Gabriel W. Gorenstein, prosecutors said the guards were necessary "to prevent harm or flight."

What happened to sending men like Madoff to jail pending trial? Isn't that what jail is for? We don't generally confine murderers and rapists to their homes, do we? No; we send them to jail pending trial. I guess the laws are different for white collar criminals. Of course, if I had Madoff's $50 billion, I could hire an entire army equipped to take over all of New York state and free me from my imprisonment.

According to Federal officials, confining Madoff to his apartment was done to protect him from all the threats he has received because of the $50 billion financial fraud he is accused of perpetrating. Yeah, good idea. The New York Post labeled Madoff as "The Most Hated Man in New York." I say anyone who has defrauded individuals and large investment banks of $50 billion probably deserves a few threats.

Squandering $50 Billion?

What galls me the most, however, are news accounts that constantly referred to Madoff as having "squandered" $50 billion. My question is: How do you possibly squander $50 billion? Seriously, it would be an almost impossible task to do so.

If you gave me that amount of money and said, "John, go ahead and spend the money. We will even give you the next 10 years to squander $50 billion," I don't think I would be up to the task.

Do you realize most calculators won't even display numbers that large? Okay, let's divide $50 billion by 10 years. That's $5 billion a year and that will display on my calculator. Divide that amount by 365 days to indicate how much I need to spend each day and that turns out to be $13,698,630 per day! My God, how could anyone spend that amount each day?

Sure, the first couple of days or even the first few weeks might be fun. A Citation Jet here, a huge yacht here, then you buy an island and maybe even staff it with your own army. If you saved it up over a couple of days you could probably buy a whole country. Iceland comes to mind since they are bankrupt. But then again who would want to buy Iceland?

Violating Wage & Hour Regulations

In the past 25 years of writing columns for this magazine, I've noticed certain issues or subjects that tend to rear their head on a regular basis—interpreting profit and loss statements, explaining the definition and use of sales per employee, and promoting or explaining the latest finds from the studies I conduct for NAQP. The fact that some of these subjects seem to reappear on a regular basis is simply a reflection of one generation taking over for another as well as individuals with no previous business experience entering this industry.

One of the topics that never seems to go away completely is what constitutes the difference between a "salaried" employee and someone who is paid an hourly wage. Based upon some recent consulting visits as well as a dozen or more emails I have read recently, I realize that many small business owners (and some not so small) still don't understand that they may be running afoul of the law and putting themselves at risk somewhere down the line.