Are You Paying Your Employees Correctly?
The following article was provided by Berchem Moses PC. It is posted here with permission.
Are you paying your employees correctly?
Are you hoping your payroll company is ensuring all aspects of your wage-and-hour compliance? Are you on autopilot from decisions made by your office manager more than a decade ago?
With liquidated damages and penalties, an audit from the Department of Labor or a wage and hour lawsuit from a disgruntled employee can be enormously costly.
This article busts some common wage and hour myths to help you make sure your pay practices are compliant.
Myth No. 1: If I pay my employees a salary, I don’t need to pay them overtime at time-and-a-half when they work more than 40 hours in a work week.
Employees who work more than 40 hours in a work week are entitled to overtime pay at time-and-a-half, unless they are legally exempt from overtime.
Non-exempt employees must be paid overtime.
With very limited exceptions, employees who are exempt must meet legal requirements based on salary basis (that they are paid salary not hourly), salary level (a minimum weekly salary of $684), and duties.
Many employers overlook the last one—duties.
There are several ways for an employee to meet an exemption based on job duties (most commonly that they meet the executive, administrative, or professional exemptions).
However, it is necessary to meet all of the applicable tests for an employee to be exempt from overtime, not just the salary basis test.
Myth No. 2: If an employee worked overtime without my permission, I don’t have to pay them for it.
Generally, the employer must pay an employee for all hours worked, including overtime, even if the employee worked without permission.
One rationale is that the employer still benefited and that an unscrupulous employer might tell the employee not to work overtime, while still effectively requiring it.
The best way to avoid having employees running up the payroll through unauthorized overtime is to have clear policies prohibiting them from working overtime without permission from a supervisor.
If an employee violates the policies, pay the employee for the time worked and take disciplinary action to avoid recurrence.
Also, consider why the employee felt the need to work overtime and address issues as needed, such as an overwhelming workload.
If the employee continues to violate the policies, it may be necessary to consider termination for insubordination.
Myth No. 3: I can fix an employee’s time record to correct for missed punches and other errors.
While the law does not directly prohibit employers from making changes to increase accuracy in their pay records, when an employer makes changes to an employee’s timekeeping records, it raises suspicion.
The state and federal departments of labor are likely to take the position that the employer was changing the time record to short-change the employee, even when it would seem fairly obvious that the issue was simply a missed punch.
If you discover an employee’s time record is inaccurate, document the reason for the change and have the employee sign off.
If an employee repeatedly fails to log their time accurately, disciplinary action may be warranted.
Myth No. 4: As long as I treat my employees well, I don’t need to worry about wage-and-hour laws.
This is just not true and can backfire by actually increasing potential liability. Even if your business feels like family, a Department of Labor audit may reveal that your generosity does not fit legal guidelines.
One example is paying a non-exempt employee a very generous salary and then ignoring overtime.
You may very generously pay a secretary working 50 hours per week a salary of $100,000. But that means their regular hourly rate is really $38.46 and you owe $192.30 per week in unpaid overtime.
If the Department of Labor audits or the employee initiates a claim, the generous salary will prove to be much more expensive, as the unpaid wages would be half if the salary were only $50,000.
Non-discretionary bonuses are another form of generosity that can increase liability.
Many bonuses, such as incentive bonuses, are required by law to be included in the regular rate, thus increasing the value of any overtime hours worked by a non-exempt employee.
Proceed with caution when implementing a bonus system, particularly one based on a formula or designed to encourage greater output from employees.
When it comes to wage and hour laws, what looks like generosity is often a basis for greater liability.
Myth No. 5: I don’t need to pay employees while they are on a break.
This is sometimes true. Exempt employees are generally paid a salary and will not have pay deducted for breaks.
Non-exempt employees are generally paid for time actually worked, so not paying for breaks is acceptable provided the breaks are 20 minutes or longer.
Shorter rest breaks are included as time worked.
To avoid employees taking multiple 19-minute breaks, make sure to have clear policies about what breaks are allowed in your business and to indicate that additional breaks are not permitted.
Then, if an employee violates the rules, pay the employee for the break time if it is less than 20 minutes, but be sure to take disciplinary action as warranted.
It is possible to not pay for short breaks in certain limited situations related to employees taking leave under the Family and Medical Leave Act and employees taking breaks to express milk.
Consult an attorney before deducting pay in these situations.
Myth No. 6: If I have a small business, it is okay to operate informally and not worry too much about wage and hour laws.
Wage and hour laws do not come with minimum employee requirements. They apply to virtually every business and even some domestic work situations.
While the requirements may appear burdensome, they are designed to protect employees and the Department of Labor will not decline to protect employees simply because they work for a small employer.
It is best to think of wage and hour compliance like taxes.
Employers are not excused from compliance simply because they wish to operate informally and it is the employers who operate informally who are at the most risk because they will often lack the records needed to demonstrate compliance with pay requirements.
Myth No. 7: I can keep payroll records offsite and I can discard them whenever I choose.
State and federal law dictate specific information that must be included in an employer’s payroll records.
Connecticut law requires that the records be retained at the place of employment unless the employer receives written approval from the state Department of Labor.
In most cases, payroll records must be kept for at least three years.
Complying with state and federal wage and hour laws may seem overwhelming.
Whether your practices need a check-up or a complete overhaul, labor and employment attorneys can help.
Examining and correcting your pay issues before they are subject to scrutiny from the Department of Labor or a court is an investment in your business’s success.
It pays to get this right!
About the author: Rebecca Goldberg is an associate with Berchem Moses PC, focusing on labor and employment matters in state and federal courts, and administrative agencies.
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