How to Avoid Costly Wage and Hour Claims

Kristi Birkeland on Feb 9, 2018 3:00:00 AM

Wage an hour claims are nothing to scoff at. According to Seyfarth’s annual Workplace Class Action Litigation Report, the value of the top 10 wage and hour settlements was $695 million dollars in 2016. Yes. You read that right. That’s just the top ten cases.

If you think it won’t ever happen to you, you could be right. But are you prepared to bet a few millions bucks on that?

Preventable mistakes

The vast majority of wage and hour claims are avoidable. Staying on top of the definitions for exempt vs. non-exempt employees, and independent contractors 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 on top of how you’re compensating them for their time. And how much time they spend working. Here are some common employer mistakes that can result in unhappy outcomes.

Avoiding overtime

In the eyes of the law, employees are entitled to overtime, unless the employer can prove otherwise. And yet companies have all kinds of creative ways to get out of paying it. Strategies that can get you in trouble 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 pay up.

Sloppy record keeping

In order to pay people accurately, you must have a time tracking system that works. 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/when a wage and hour claim is filed. 

Late or inaccurate paychecks 

Making payroll isn’t always easy, but scrimping on paychecks can cost you big in the long run. Pay your employees what they’ve earned in full and on time. This includes any overtime they may have worked. And while you’re at it, abide by the deadlines for your payroll taxes. Just like your employees expect to get paid, so does Uncle Sam.

Disappearing break times

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 on this one. All it takes is one unhappy employee to file a claim, and you could be looking at a class action suit. 

Enabling after hours work

With technology allowing many workers to be available 24/7, this is becoming a bigger issue. If your non-exempt employees are working on these devices after hours, that time needs to be logged. And you need to compensate them for it. This can get messy quickly.

Think twice when deciding whether or not your non-exempt employees should have work-issued smart phones and laptops. Essentially, you’re giving them 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.

Clear your conscience

Tired of just hoping you’re in compliance? Take the time to make it so.

  • Train you 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.

Photo by zimmytws 

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Topics: HR Admin