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Wage and Hour Compliance Essentials for Employers

by Kara Shea

Wage and hour compliance issues are probably the single greatest source of worry (and sleepless nights) for employers, at least those who are reading the headlines. In the last several years, employers around the country have been hit with huge damages awards in wage and hour litigation or have agreed to pay hefty sums to settle overtime claims filed by a group of employees.

Despite the plethora of sobering statistics, many employers adopt a “head in the sand” approach to overtime and wage issues, gambling that their questionable pay practices won’t be discovered. Those employers mistakenly assume that because business is good and employees seem satisfied with their compensation, they have nothing to worry about.

But remember: Employees can’t waive their rights under federal and state wage and hour laws. In other words, no matter how agreeable your employees are to a particular arrangement, if you’re paying them incorrectly, they have a claim against you for back wages.

How do you keep yourself out of wage and hour trouble? No one is perfect, and that’s especially true when it comes to businesses and wage and hour compliance — particularly since even “the experts” don’t always agree on the right answer to many common wage and hour questions. If you troubleshoot for the following issues, however, you will greatly reduce your risk and exposure for wage and hour claims.

Learn more about wage laws and correctly classifying workers in the Wage and Hour Compliance Manual

What employers should do
Check exempt classifications. Audit the exempt classifications of the workforce periodically to ensure that employees are properly classified as exempt or non-exempt. Remember that the job duties attached to a particular position may change over the years, and a position that was exempt 10 years ago may no longer be exempt today.

Play it safe. Remember, you can always do more than the law requires. Just because you could treat a position as exempt, for instance, doesn’t mean you’re required to do so. Paying an employee overtime is always the least risky approach.

Make your documentation work for you. Use job descriptions and performance evaluations to your advantage. A job description isn’t the determinating factor — it’s what the employee actually does that matters. Job descriptions, however, can be persuasive to a U.S. Department of Labor (DOL) investigator or a court if they’re effectively written. If an employee is carrying out exempt duties (such as exercising discretion regarding matters of importance, assisting a customer with business operations, supervising two or more personnel, hiring and firing, and using advanced knowledge), be sure to put all of that in her job description.

State-by-state comparison of 50 employment laws in all 50 states, including wage laws

Audit your payroll practices. Periodically check to ensure that you’re tracking time and paying correctly, looking closely at the following potential trouble zones:

  1. Make sure bonuses and commissions are being factored into overtime pay if required.
  2. Make sure all deductions from pay (for both exempt and non-exempt employees) are appropriate.
  3. Pay attention to areas or departments where overtime suddenly drops off, looking for situations in which employees are working off the clock or underreporting their time.
  4. Make sure no illegal “comp time” arrangements are being used, either on or off the books.

Evaluate your companies polices and practices with the Employment Practices Self-Audit Workbook

Don’t monkey with time records. Make sure you have accurate time records for all non-exempt employees going back three years. Make sure employees adhere to your time keeping policies and are recording their real hours, not just scheduled hours. And if you ever have a situation in which you need to alter an employee time record to reduce the time, get the employee to sign off on the change.

Train your supervisors. Make sure your managers and frontline supervisors understand at least the basics regarding not permitting “off-the-clock” work, proper deductions for disciplinary violations and enforcement of overtime policies, and how to handle employee complaints about pay.

HR Guide to Employment Law: A practical compliance reference manual covering 14 topics, including overtime and FLSA requirements

Get advice. Finally, consult an experienced employment attorney before making wide-scale changes to any overtime classification, payroll practice, or wage and hour policy.

Kara Shea is an editor of Tennessee Employment Law Letter and an attorney with Miller & Martin PLLC, practicing in the firm’s Nashville office. She can be reached at (615) 244-9270.