For employers, perhaps the most frequently filed employment-related claims relate to allegations of improper payment. Many employers now face huge lawsuits by employees who claim that they weren’t paid properly under the Fair Labor Standards Act in the form of both individual and class actions. Additionally, both state and federal governmental agencies are on the lookout for employers that fail to pay or classify their employees properly. Employers are cautioned to make sure that their employees are properly classified and paid according to prevailing FLSA standards.
The types of claims raised under the wage and hour category vary significantly, ranging from claims of entitlement to overtime to claims of misclassification and failure to pay minimum wage. Common types of claims have alleged that employees are working off the clock and haven’t been paid, as well as allegations that employees should be paid for donning and doffing required job clothing. Additionally, many states have laws covering the timing of the payment of wages to employees. As you can see, there is a lot for employers to be aware of and to proactively address. There’s even an app for employees to track their time.
The FLSA recognizes two types of employees, exempt and non-exempt. Exempt employees are normally paid a salary and employers are not required to pay them extra for working overtime. Non-exempt employees on the other hand, are usually paid by the hour and employers must pay them time and a half for working more than 40 hours in a work week. Employers are well informed to contact competent counsel to discuss the classification categories for its workforce.
As for the non-exempt employees, the primary consideration for the employer is to make sure that non-exempt employees are paid for all hours worked. This would include time that a nonexempt employee works during lunch or works before or after clocking in or out. Simply put, after 40 hours, you must pay non-exempt employees time and a half. As a general rule, you can’t simply give non-exempt employees “comp time” instead of paying them overtime.
In addition to making sure that your employees are properly categorized as exempt or nonexempt employees, employers are also cautioned about categorizing workers as independent contractors. The IRS has a 20 factor right to control test that is very useful in determining whether a worker is properly classified as an independent contractor. Some state laws may also apply. The independent contractor issue is on the radar for both federal and state agencies. Employers that misclassify independent contractors may face severe penalties for misclassification.
In order to avoid potential liability in this very complex area, after meeting with competent counsel, employers are encouraged to routinely audit their workforce to determine the applicable status of their employees for purposes of exempt and non-exempt status. This should include a review of all job titles and work functions. Independent contractors should be reviewed within the context of the IRS 20 factor test, as well as any applicable state law. Supervisory training and automated employee timekeeping may also be necessary in order to ensure compliance. In the end, it’s the employer’s choice — you can pay them now or pay them more later. Paying them correctly now is certainly a less painful option.
Copyright ©2011 by L&L Communications d/b/a Atlanta Tribune: The Magazine, Thomas A. Cox. Jr. Esq, author. Posted with permission from publisher. All rights reserved by the original copyright holder.