Four Steps to Limiting Wage and Hour Liability

Wage and hour violations have been big news for a long time now. Almost every day you can read stories of companies that have been assessed fines and penalties for infractions of wage and hour rules. Finding yourself in that situation is not just embarrassing — you could face a huge assessment that might threaten the very viability of your business.

This is not a position you want to find yourself in.

Where do violations happen?

According to a study cited by the Compensation Daily Advisor, some types of employees and employers are more likely to be involved with wage and hour violations than others. For instance, among others:

  • Companies with fewer than 100 employees are more likely to experience violations than larger companies. This may be due to these companies not having a full-time HR department to monitor compliance and help ensure they’re up-to-date on current laws and regulations.
  • Employees who are paid a flat weekly rate are more likely to experience violations than those who are paid by the hour. Employers might not track their time, thereby missing overtime incurred by these workers.
  • Foreign-born workers are more likely to experience violations. Sadly, some unscrupulous business owners and managers take advantage of immigrant workers, sometimes threatening them with deportation if they complain of any wage issues.

A prudent business owner or manager should be on the lookout for any potential wage and hour problems. Even if your business has a dedicated HR department, they can’t be everywhere and see everything. Every manager and supervisor has the responsibility to make sure their department operations comply with the law.

What kinds of violations should we look out for?

While there are probably as many different ways of running afoul of our complex wage and hour laws as there are supervisors and employees, it turns out there are certain general types of violations that are fairly common. If you want to maximize your chances of avoiding liability, keep a special lookout for these issues:

  • Off-the-clock work: Supervisors under budget pressure may be tempted to ask employees to work off the clock. This is a huge no-no. We’re all in favor of increased productivity, but make sure you’re not pressuring your supervisors to accomplish more than what can reasonably be done with the available labor in the available time.
  • Not paying minimum wage: This problem often goes hand-in-hand with off-the-clock work. When an employee who makes minimum wage (or close to it) works additional hours for which they’re not paid, their effective hourly rate can easily fall below the minimum.
  • Not paying proper overtime: This is probably one of the trickiest issues to deal with. For instance, many business owners incorrectly think that overtime should be calculated based on the employee’s standard hourly rate. In fact, the law says overtime is calculated on the employee’s “regular rate of pay” which can be affected by bonuses, stipends and other payments.
  • Pay stub / illegal deduction violations: Even if you pay an employee in cash, you’re still required to provide an itemized pay stub. Failure to provide the employee a pay stub and to maintain proper records for yourself of worker pay and deductions taken can lead to penalties and fines for your business. Beyond that, a surprising number of items that some businesses deduct from employee pay turn out to be illegal. If you’re taking deductions from employee pay for anything other than standard items such as income tax, FICA, health insurance premiums, 401(k) contributions and the like, you’d be wise to check with your employment law attorney to make sure those deductions are allowed.
  • Intimidation and retaliation: When a supervisor thinks an employee complaint has triggered a Department of Labor audit or other problem for them and your business, it can be tempting to try to “get back” at the worker they think caused the problem. Retaliation can take the form of termination, demotion, reassignment to a less-desirable position, cutting hours, reducing pay, denying overtime opportunities or anything else that could be interpreted as an “adverse employment action.” Even something as simple as failing to invite the employee to a staff meeting could be interpreted as retaliation. The DOL takes a dim view of intimidation tactics, whether they’re used as punishment or in an attempt pre-empt workers from filing complaints in the first place.

The thing is, even when you know the rules, you can still find yourself in trouble because of misunderstandings with employees or actions taken by well-meaning but misinformed supervisors and managers.

What’s a conscientious employer to do?

Fortunately, you can minimize your potential liability by following these four steps:

  1. Conduct a wage and hour audit: Your employment law attorney can help you with this. A thorough audit can help make sure your official policies and procedures comply with the law. If you find any trouble spots, take care of them right away. Don’t wait for an employee to file a complaint or the labor department to discover the issue during an examination.
  2. Train your managers and supervisors: Ensure they’re aware of all your policies, that they’re on board with both your policies and the law, and that they fully understand the consequences of non-compliance. Make it clear that such things as off-the-clock work and retaliation will not be tolerated.
  3. Train your employees: Train them on the proper use of your time and attendance system, especially if (like our AcroTime cloud-based workforce management service) it includes advanced features such as employee self service or job costing. Make sure they’re also aware that off-the-clock work and retaliation are not allowed, and that they’re all aware of the proper reporting procedures for any violations. (Be sure you follow up appropriately with any complaints. If you take no action once you’ve become aware of a potential problem, you’re only making things worse for yourself.)

    Best practice: in addition to verbal training, print out these procedures, give each employee a copy, then have them sign a sheet acknowledging they’ve received and understood it. (Pro tip: AcroTime HR can help you document and manage all your training, both supervisor and employee.)

  4. Track all employee work time: This is your best protection against off-the-clock work and minimum wage and overtime issues. Here’s something not all business owners know: you are permitted to track all employee work time, even salaried exempt employees. (Just don’t use exempt employees’ time as a basis for computing their pay.) This can save your cookies if any of those exempt employees ever get reclassified as non-exempt, by helping make sure you don’t overpay for back overtime. Tracking all employee time also can help you better manage your business, equitably allocate overtime and avoid employee burnout — plus, an automated time and attendance system can save you a ton of time and money on payroll preparation. (It’s pretty much a no-brainer, really.)

Fortunately, Acroprint can help you with these issues. Our AcroTime worforce management service includes a time and attendance module that will accurately track employee work time; an HR module that will help you track documentation, training and compliance; and a payroll module that will produce the required pay stubs and help ensure your standard deductions are properly calculated. Sweet…

To schedule a demo, get a quote or get started with your account right away, visit the AcroTime website.

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