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Avoid Common Wage & Hour Mistakes

By August 18, 2011

Wage and hour mistakes continue to cost employers huge sums in jury verdicts, attorneys’ fees, settlements, and back wages.

Cummins & White routinely counsel our clients on the importance of a legal review of corporate policies and procedures, including employee handbooks, time sheet protocols to document meal and break periods and start/end times, detailed job descriptions, offer letters, among others.

The U.S. Department of Labor Employment Standards Administration Wage and Hour Division (WHD) enforces labor standards. Under the Obama Administration, WHD’s initiatives continue in low-wage industries, such as restaurants, healthcare, hotels and motels, day care, and construction. WHD investigators also look for employees incorrectly designated as independent contractors or exempt employees (Fair Labor Standards Act violations). Most infractions involve overtime and minimum wage violations.

Processing payroll and achieving compliance with labor standards can be tricky, but it can be done. Below are common wage and hour mistakes and valuable tips that will help you avoid fines and lawsuits.

Top Five Wage & Hour Mistakes

  • Payment of straight time for overtime hours. Although violations can occur when an employer fails to pay overtime after 40 hours in a workweek or eight hours in a day, often it results from an employer’s failure to account for time periods, including pre-shift and post-shift work activities and break periods or non-qualifying “meal” periods.
  • Improperly Classifying an Employee as an Exempt Administrative Employee.This mistake can occur when employees do not have as their primary duties “the performance of office or non-manual work directly related to the management or general business operations of the employer or the employer’s customers.”
  • Improperly Designating a Worker as an Independent Contractor. In 2008, the WHD identified approximately 1,600 workers who did not receive minimum wage or correct overtime pay because they were incorrectly designated as independent contractors.
  • Regular Rate Issues. Employers often fail to include all forms of premium pay received by an employee when calculating the employee’s regular pay rate, including nondiscretionary bonuses, shift differentials, and other premium payments.
  • Improper Deductions. Employers can’t include as wages uniforms or items considered to be for the benefit of the employer. As a result, employers can’t take credit for those items in meeting obligations toward paying minimum wage or overtime and can’t make deductions for those items.

What Can You Do?

Consider the following suggestions in order to avoid investigation and possible violations:

  • Review employee job descriptions and duties to ensure that the description qualifies the employee as exempt and describes what the employee actually does. Ensure that essential job duties identified by the labor board are included in the job descriptions to document exempt activities expected.
  • For purposes of calculating the hourly rate, make sure that the hourly rate includes nondiscretionary bonuses and other benefits (important when calculating overtime pay of 1.5 times the hourly rate).
  • Re-evaluate employee time-keeping methods to ensure compliance. If the time keeping is lacking, it can be documented at this time.  Cummins & White often can recreate time keeping by utilizing cell phone and email records to prove employee activity.

Cummins & White is committed to providing clients with information about how to comply with federal and state employment laws. We monitor the law and help our clients avoid common mistakes and maintain compliance with complicated labor laws and regulations.  Prevention is key and can be accomplished with a thorough legal review of your corporate policies and procedures. It could save you significant legal fees to defend a wage and hour dispute.