Benefits and Compensation, HR Management & Compliance

Wage and Hour Simple? The 10 Sins

Sin #1. Failure to pay the minimum wage

We’ll pay you $5 an hour until you learn the ropes; then you move up to $7 an hour.

Virtually all employees are entitled to receive at least the minimum wage (the federal minimum wage is $7.25 per hour; many states have higher minimum wages) for all hours worked. Special arrangements may be made for waitstaff (although their tips have to put them above the minimum wage) and for certain training situations.

Sin #2. Failure to pay for all hours worked

Be sure to stay close to your phone tonight in case that customer calls in from the West Coast.

Clock out before you set up for tomorrow, OK?

Employers must pay nonexempt employees for all hours worked, even if the employee has volunteered to do the work without pay, and even if you’ve forbidden the employee to do work. (You can discipline the employee in this situation, but you have to pay for the hours.)

Some violations are blatant, like “clock out and continue working,” but some are not so obvious. For example, expecting nonexempt workers to take customer calls off hours, or insisting that they answer the phones during an unpaid lunch break.

Misclassification is a top violation—Are you guilty? Find out on March 27, 2014 with an interactive webcast Exempt vs. Nonexempt: How to Find and Fix Misclassification Mistakes. Learn More

Sin #3. Misclassifying as exempt

Your title is Assistant Manager. You’re exempt.

You get a salary—so you’re obviously exempt.

Organizations may wish to classify workers as exempt to avoid paying overtime and/or to avoid paying for extra hours worked. Unfortunately, an employee’s title doesn’t mean anything, and the fact that the person is paid on a salary basis doesn’t mean anything—it’s the job duties that determine whether a worker is exempt. There are very specific guidelines from the Department of Labor for the main types of exemptions—administrative, executive, creative, and outside sales.

Sin #4. Misclassifying as independent contractors

You’ll be working alongside our regular employees but you’ll be an independent contractor.

Of course he’s an independent contractor—we signed an agreement.

Many employers are tempted to classify workers as independent contractors because it avoids many of the payments that have to be made to employees and on their behalf (e.g., Social Security). But many so-called independent contractors are really employees. In particular, the more control the employer has over how the person does the job (giving explicit instructions, providing materials and tools, dictating hours, being the only customer), the more likely that worker is not an independent contractor. For sure, if the person is sitting right with the regular employees, doing the same work, the person is likely an employee.

Detailed sets of criteria from the DOL and the IRS help you to make the determination of employee vs. independent contractor.

Misclassification as exempt—one of the “10 sins of wage and hour.” Mak3 sure you’re safe. Join us March 27 for an interactive webcast Exempt vs. Nonexempt: How to Find and Fix Misclassification Mistakes. Earn 1.5 hours in HRCI Recertification Credit.   Register Now

Sin #5. Failure to properly calculate and pay overtime

We don’t pay overtime. If you don’t want the extra hours, just say so.

I need you to work 50 hours this week; you can take some comp time next week instead of claiming  the overtime.

Employers can’t avoid their obligation to pay overtime. Under federal law, except in very limited circumstances, overtime at the rate of 1½ times the regular rate is due for all hours worked over 40 in a workweek. Private employers may not use a “comp time” system.

Another very common violation is failure to pay overtime based on the “regular rate” of pay, which includes any nondiscretionary bonuses. So, for example, if at the end of the month workers get a production bonus, you have to go back and recalculate their overtime premium.

In tomorrow’s Advisor, more wage and hour sins, plus we announce a new webinar that will help you sort out classification mistakes before the feds decide to help you.

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