5 Steps You Can Take to Avoid Wage and Hour Claims

5 Steps You Can Take to Avoid Wage and Hour Claims

If you are a business owner, knowing the basics of applicable wage and hour laws is an absolute must.

October 12, 2022

If you are a business owner, knowing the basics of applicable wage and hour laws is an absolute must. Last year alone, the Department of Labor’s wage and hour division collected over $322 million in back wages from businesses. Nothing can bring a business to its knees faster than a fine and potential legal action from the government. For this reason, you need to protect the investment that you have made in starting and building your business by ensuring that it is protected against potential liability due to wage and hour claims. Below are some steps that you can take to limit your liability and take necessary precautions to avoid wage and hour claims. Of course, the information provided in this article is general. For feedback specific to your business, contact an experienced business lawyer to schedule a one-on-one consultation.

  1. For hourly employees, establish a system for recording time. The first step for any business is to establish a reliable system for recording the amount of time that hourly employees are working each day. Some businesses may require employees to clock in and clock out or self-report their time at the end of each day. Make sure that these times are reviewed by a supervisor who can confirm that they are accurate. It is also helpful to have the employee sign off on their time or validate it each day or week, as this can be compelling evidence if they later claim to have worked more time than they were paid for.
  1. For exempt employees, confirm actual exemption in practice and in writing. For certain types of employees, an employer can opt-out of minimum wage and overtime requirements. However, it is not enough to merely classify the exempt employee as such on paper; their behavior and day-to-day duties, in practice, must actually match the applicable exemptions. In other words, it doesn’t matter what you say; it matters what you do, when it comes to classifying employees as exempt. You must get this one right, otherwise the penalties can be stiff.
  1. Establish a system for payment. The next step is making sure that your business has an accurate and reliable way of paying employees on time for the hours that they have worked. Transparency is important, so you may want to include the number of hours worked and the type of pay (regular or overtime) on each pay stub, ensuring that it corresponds with the time validated by the employee. Make sure to always pay employees on time and in the correct amount. Overtime pay should be paid at the same time as regular payment, and time off should not be used as a means of payment. Also, ensure that you are paying a fair wage and that employees receive at least minimum wage unless an exception qualifies.
  1. Create detailed and accurate job descriptions. Make sure that you spend the time figuring out exactly what each employee will do and what their job duties and responsibilities will be. Then it is important for their supervisors to understand what their job duties are. If employees are forced to complete additional tasks that are not included in their job description, they may seek additional compensation, so it is important to have a clear understanding of what employees must do so that everyone is on the same page. This can also help in the event that the employee needs to be let go due to poor performance since you will be able to point to exactly what they were required to do and what they failed to do.
  1. Make sure that your workers are accurately classified. Depending on the extent of control and responsibilities delegated to your workers, they may be employees or independent contractors. It is critical to make sure that you do not misclassify employees as independent contractors, as this could result in severe penalties and litigation. If you are unsure about how to classify your employees properly, be sure to consult with an attorney. When retaining an independent contractor, it is always advisable to use a formal, written independent contractor agreement to confirm and define the relationship. And again, just like exempt vs. non-exempt determinations—walk the walk, don’t just talk the talk. The Department of Labor, the IRS, and the plaintiff’s attorney who will file suit on behalf of your independent contractor-turned-employee, will all look at what the person did in practice; not just what is written on paper.

Unsure of where to begin? Schedule a Consultation with Munizzi Law Firm Today.

If you want to protect your business from wage and hour claims, the experienced business law attorneys at Munizzi Law Firm are ready to help. Contact us today to schedule a consultation.

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