It’s no secret that the Department of Labor’s (DOL) Wage and Hour Division (WHD) is cracking down on labor law violations. In fiscal year 2019, they collected a record-breaking $322 million in back wages for more than 215,000 workers. As the DOL has increased its communications efforts around protecting workers, employees are becoming more aware of their rights in the workplace. And they’re more willing to take action against employers who have violated labor laws.
Among the most common legal complaints are wage and hour lawsuits,
frequently filed by employees who feel they have been paid unfairly. Lawsuits range from employees seeking overtime pay to those who are challenging their classifications as contractors or employees. As the number of labor law violations and lawsuits continues to rise, employers must be vigilant in properly managing employees or fall victim to the added costs of penalties and back wages.
As an employer, it’s critical that you review HR policies and employee classifications to ensure you’re not making the same mistakes.
Here are five tips your organization should follow to help avoid labor law violations and employee lawsuits.
Be clear about worker duties.
Wrongly classifying employees as exempt, and thus denying them overtime pay, is a costly mistake made by many employers. The key to properly classifying is to truly know what your employees do. That doesn’t just mean what their job description says they do. It means understanding their actual duties each day and designating them as exempt vs. non-exempt accordingly. The law presumes employees are entitled to overtime; the burden is on the employer to prove otherwise. That’s why having clear, accurate job descriptions on file is critical, so employers can support an employee’s exempt status. Most employees are likely to be considered non-exempt and therefore eligible for overtime pay. At evaluation time, have your employees confirm their job descriptions. If they don’t have a description, ask them to track their duties for a week and develop one. In that process, measure how they really spend their time and classify each employee appropriately.
Keep accurate, detailed records.
Keep records on name, address, gender, workweek, hourly rate, daily and weekly hours worked, daily or hourly earnings, overtime pay, and extraordinary additions or deductions from pay for three years for all hourly employees. The rest of your required information will come from your payroll records. If you don’t keep accurate records, an employee can sue for virtually any amount of back pay claiming unpaid hours worked. You’ll need well-kept records to offer direct evidence that specifically address the issues an employee’s lawsuit raises.
Pay wages when they’re due.
Making payroll can be challenging because of issues such as cash flow, payroll taxes, withholdings, Social Security—you name it. It’s stressful for business owners! As a result, there are a lot of things a lawyer can go after. What else NOT to do:
- Don’t hold back on overtime pay to “make it up” on the next check.
- Don’t pay $500 if you owe $1,000.
- Don’t pay your contractors but not your employees.
- Don’t delay on your payroll taxes. The government is cracking down, which could be costly for your business.
- Don’t average employee hours over a two-week pay period. You cannot consider a 50-hour week plus a 30-hour week as 80 hours of straight. Each work week stands alone in the eyes of the law.
Don’t use comp time to pay for overtime.
Private employers cannot give time off in the future in exchange for overtime work now. There is no “banking” of comp time. Even if employees agree to it, you’re violating the Fair Labor Standards Act. Keep it simple: Give your employees what they’re due every payday.
Classify contractors and employees properly.
If you can tell a worker where to be, what to do and when to do it, that worker is probably your employee—not a contractor. It all comes down to who has control. Consider factors such as:
- Does the company control or have the right to control what the worker does and how the worker does his or her job?
- Are the business aspects of the worker’s job controlled by the payer? (This includes things like how the worker is paid, whether expenses are reimbursed, who provides tools/supplies, etc.)
- Are there written contracts or employee-type benefits (i.e. pension plan, insurance, vacation pay, etc.)?
- Will the relationship continue, and is the work performed a key aspect of the business?
If you misclassify and lose a suit, you’ll pay back wages and back payroll taxes.
Not only that, you’ll end up on the government’s radar going forward which means a strong likelihood that auditors will check in on your organization more frequently. If you’re not sure about contractor-employee status, then cover yourself by making the worker an employee.
In the end, remember this: When there’s an opportunity to be fair, do it! What’s good for your employees will be what’s good for you, as well.
Source: Department of Labor
Mitigate Compliance Risk
Look no further than Paycor’s unified, all-in-one HR and payroll platform. It all starts with paying your employees accurately and on time. Paycor Payroll saves you time by offering an efficient payroll process while ensuring tax compliance. Plus, Paycor’s HR Support Center and On-Demand solution will help ensure your job descriptions are accurate and up to date. Plus, if you have questions about classifications, our certified HR professionals can offer support and guidance.