Wage and hour missteps
can lead to lawsuits that have enormous financial consequences for your company.
To help you figure out whether you’re in compliance or headed for a fall,
here’s a look at some of the most common wage and hour mistakes—and how you can
prevent them by regularly conducting your own audits.
The HR Management & Compliance Report: How To Comply with California Wage & Hour Law, explains everything you need to know to stay in compliance with the state’s complex and ever-changing rules, laws, and regulations in this area. Coverage on bonuses, meal and rest breaks, overtime, alternative workweeks, final paychecks, and more.
Exempt Misclassifications
One of the most common
wage and hour mistakes is misclassifying workers as exempt from the minimum wage
and overtime requirements of the Fair Labor Standards Act and California wage
and hour laws. One common reason employers misclassify workers is that they
rely on outdated or inaccurate information about job duties. It is important
for employers to remember that job duties change and evolve over time, so HR must
monitor jobs closely to make sure the exemption still applies.
Another frequent mistake
is misclassifying employees as independent contractors. Employers should
thoroughly evaluate whether workers satisfy the requirements under federal and
state law, regulations, and case law covering independent contractors to be
sure they are classifying workers correctly.
Other common wage and
hour mistakes include:
• unpaid off-the-clock
work by nonexempt employees
• poor recordkeeping of
work hours
• missed or denied meal
or break periods in violation of state wage and hour laws
• improper deductions from
exempt employees’ pay
• not paying employees
properly for travel time or work preparation time
• incorrect calculations
of workers’ regular pay rate for the purposes of calculating overtime
Audit Strategies
To prevent, identify,
and remedy violations, employers should audit their wage and hour practices
regularly and educate decision makers about wage and hour rules.
When performing an
audit, start by identifying all employees who are classified as exempt, then
narrow them down to the “gray area” cases and evaluate their status based on
federal and state standards. It is also a smart practice to interview managers
who have knowledge of an employee’s job duties to ensure the duties performed
are indeed exempt. Keep in mind that managers tend to overstate the discretion
and independent judgment an employee exercises, so it’s critical to ask probing
questions, challenge generalizations, and request specific examples. Also, if
possible, interview several managers with knowledge of the employee’s duties.
Here are some other tips
for conducting audits:
• Review (and revise)
job descriptions to ensure that they accurately reflect current job duties and responsibilities.
• Reclassify
misclassified employees (with the advice and input of legal counsel) or, if
feasible and desirable, modify job duties.
• Calculate the
“unfunded liability” for overtime and benefits for misclassified employees.
• Implement a system for
ensuring that existing and new employees are classified properly.
• Make sure that you are
paying nonexempt employees for all hours worked and paying correct overtime premium
rates, including figuring in bonuses as required by law.
• Check whether you are
providing legally required meal and rest periods. Look at records, interview supervisors,
and take corrective action as necessary.
• Check your
recordkeeping practices against state and federal requirements.