Wage and hour claims are a big headache. And a big deal. And a really big expense.
According to Seyfarth’s annual Workplace Class Action Litigation Report, the top ten settlements in various employment-related class action categories in 2017 totaled 2.72 billion dollars, an increase of over $970 million from 2016. And that’s just the top ten cases!
If you think a costly wage and hour claim could never happen at your business, you might be right. But are you prepared to bet a few millions bucks on that?
The worst part
Adding insult to injury is the fact that most wage and hour claims are completely preventable.
Staying on top of the definitions for exempt vs. non-exempt employees, and independent contractors vs. employees is critical, and structuring your positions accordingly will keep you on the straight and narrow. But there’s more to it than that.
When it comes to non-exempt employees, you have to make sure you’re accurately tracking the time they spend working, and compensating them correctly.
Here are some common employer mistakes that can result in very unhappy and expensive outcomes.
1. Not paying overtime: The law says employees are entitled to overtime, unless the employer can prove otherwise. And yet many companies still aren’t paying up. Strategies that can get you in trouble here include:
- Misclassification of positions and duties
- Averaging weekly hours over time instead of treating each work week as its own entity
- Offering comp time in exchange for extra hours worked
Even if your employees wholeheartedly agree to one of these “solutions,” you’re still in violation. And if push comes to shove, you’ll have to fork it over.
2. Poor time tracking: In order to pay people accurately, you must have a time tracking system that works accurately. Relying on memory, estimates, text messages, verbal exchanges or other such methods is unreliable at best and disastrous at worst. Without well-documented records and processes, you have no way of ensuring you’re in compliance. And no way of protecting yourself if a wage and hour claim is filed.
3. Incorrect or late paychecks: Making payroll isn’t always easy, but scrimping on paychecks can cost you big in the long run. Always pay your employees what they’ve earned— in full and on time. This includes any overtime they may have worked. Also be sure you don’t miss those deadlines for your payroll taxes. Just like your employees expect to get paid, so does Uncle Sam.
4. Break mistakes: Sure, you have a break policy. But is it clear and documented? Better yet, is it communicated and enforced?
Your employees are legally entitled to lunch and rest breaks, but many employee workloads aren’t break-friendly. And some employees will want to skip their breaks in favor of taking off early. While you may have some flexibility with lunch breaks, rest breaks are mandatory. Often, they are required for health and safety reasons.
Don’t accept that your team is “too busy” to take a break. This mindset isn’t just unhealthy. It can also be very expensive.
Some keys to making sure breaks happen:
- Put rest breaks in your policy and communicate it clearly to staff
- Train management on the policy and to recognize signs that it’s not happening
- Maintain adequate staffing levels to facilitate breaks
- Check in with employees to make sure they are taking them
Employees who want to opt out of breaks can be problematic. Even if these folks are willingly defying the rules by not taking their breaks, ultimately employers can be held responsible. Don’t look the other way here. All it takes is one unhappy employee to file a claim, and you could be looking at a class action suit.
5. Allowing work after work: Technology can give employees 24/7 availability and access to their work, which can be great. But if your non-exempt employees are working on their devices after hours, that time needs to be logged. And you need to compensate them for it. This can get messy pretty quickly.
Think carefully about whether or not your non-exempt employees should have work-issued smart phones and laptops. Essentially, you’re providing them with devices designed to help them work after hours, which may or may not make sense.
If you do decide to go this route, your time tracking systems will be absolutely critical to making this work. Put a policy in place that acknowledges whenever someone receives a device and makes clear that they will be paid for all work time, and that they should notify you when they are working on it.
How to stay in the clear. (And out of court)
Are you tired of just hoping you’re in compliance? Now’s the time to make it so.
- Train your HR team on the law and any changing regulations
- Structure positions and compensation that fall within FLSA guidelines
- Keep accurate job descriptions and make sure they get updated
- Classify employees correctly, including independent contractors
- Put policies in place to explain and enforce meal and break times
- Invest in an accurate timekeeping system and documentation
- Pay overtime when earned
- Deliver paychecks in full and on time
- Be aware of the pros and cons of technology and offsite work
- Stay vigilant
The beautiful thing about compliance is that you don’t have to rely on market forces, social media magic, or positive Yelp reviews to be successful.
All you have to do is know the rules and follow them.
Is your benefits broker also a compliance consultant? How about a trusted business partner? Are you confident your policies and processes are doing what they need to ensure that your company—and your employees— are healthy and productive? At Combined, this is what we do for Los Angeles employers every single day. CONTACT US NOW