Wage and hour law compliance is a critical aspect of running a business. Unfortunately, many companies find themselves inadvertently violating these laws, often due to a lack of resources, understanding, or oversight. The implications of such violations can be severe, including costly lawsuits, fines, and reputational damage.
Some Common Wage and Hour Violations
Misclassifying Employees as Independent Contractors: Many businesses fall into the trap of misclassifying employees as independent contractors to save on costs such as benefits and taxes. This misclassification can lead to significant non-compliance issues with the Fair Labor Standards Act (FLSA) and state labor laws, as independent contractors do not receive the same protections and benefits as employees, such as overtime and minimum wage.
Failing to Pay for “Off the Clock” Work: Employees must be compensated for all hours worked. A common mistake among businesses is failing to pay employees for time spent doing work-related activities outside of normal working hours, such as responding to emails or calls at home. This oversight can quickly result in unpaid wage claims. Correctly classifying workers as exempt or non-exempt is critical in helping to avoid this issue.
Incorrect Calculation of Overtime: Overtime miscalculations are a frequent problem. The FLSA mandates that employees be paid one and a half times their regular rate of pay for hours worked over 40 in a workweek, except for those who are exempt due to their job duties and salary. Errors often occur when employers do not include bonuses, commissions, or other incentive pay in the calculation of the regular rate, leading to incorrect overtime pay.
Minimum Wage Violations: Inconsistent tracking of hours worked can lead to unintentional minimum wage violations. Businesses often struggle with maintaining accurate records, especially if they are still relying on manual timekeeping methods. This can result in discrepancies between hours worked and wages paid.
Ignoring Meal and Rest Break Requirements: Many states require that employees receive meal and/or rest breaks after a certain number of hours worked. Failure to provide these breaks or to pay employees who work through their breaks can be a common oversight for many employers, particularly in high-pressure environments or industries like hospitality and retail.
Poor Record Keeping: Maintaining meticulous payroll records is crucial. Poor record keeping can not only lead to violations of wage and hour laws but also make it difficult for businesses to defend themselves if allegations of wage and hour violations arise.
Illegal Deductions from Wages: Some businesses make illegal deductions from wages, such as for uniforms, tools, or other work-related expenses, which can bring an employee’s net pay below the required minimum wage. Understanding what can legally be deducted can help avoid this misstep.
Not Adhering to Child Labor Laws: Child labor laws are stringent, with strict rules on the hours minors can work and the types of work they can perform. Businesses, especially those in industries like entertainment, agriculture, or manufacturing, can inadvertently break the law if they do not fully understand these restrictions.
How to Avoid These Violations
Education and Training: Regularly updating knowledge on labor laws.
Implementing Robust Systems: Investing in automated payroll systems that adhere to the latest legal standards can help avoid human errors in wage calculation.
Maintaining Detailed Records: Keeping detailed and organized records can defend against claims of non-compliance and help business owners stay on top of obligations.
Seeking Expert Advice: Consult with an HR professional well-versed in labor law who can provide customized guidance tailored to the specific needs of the business.
Conclusion
Understanding and complying with wage and hour laws is both a legal requirement and a crucial component of ethical business operations. Although businesses may face unique challenges when it comes to compliance, leveraging proper tools, education, and expert advice can help mitigate risks and protect both the business and its employees.
Marzano Human Resources Consulting works with businesses of all sizes to ensure they are in compliance with the complexities of federal, state and local wage and hour laws. Consider reaching out for a no-cost initial consultation.