How to Avoid Running Afoul of Wage and Hour Laws

With increases in litigation and federal and state enforcement of wage and hour laws, employers should make sure they comply with laws at both the federal and state levels.

All businesses should conduct periodic self-audits addressing the various wage and hour issues that are applicable to their workplace, in order to avoid the most common source of litigation by workers against their employers.

The goal of an audit should be to ensure that:

• Exempt classifications are properly applied to each employee;
• Exempt employees are paid on a "salary basis," and that absence and leave policies comply with Fair Labor Standards Act (FLSA) and state law requirements regarding authorized and unauthorized deductions;
• All forms of pay required to be included in overtime calculations are, in fact, included;
• Non-exempt employees are paid for all hours worked;
• Payroll records are complete and accurate and are retained for the proper amount of time; and
• To the extent that state law requirements exceed those of the FLSA, such stricter requirements become the standard.

Any issues you identify in a periodic audit should be addressed immediately. At the same time, employment policies and actions should be implemented to create an environment in which compliance becomes part of your operational mindset.

The compliance strategies below cover some of the more common potential errors in the wage and hour context.

Meal and break laws

• Implement written policies regarding meal and break times of non-exempt employees, and require approval for additional hours worked.
• Implement measures to ensure that breaks are uninterrupted and employees taking such breaks are completely relieved from duty.
• Tell supervisors not to assign tasks to non-exempt employees or allow them to perform work during their breaks.

Misclassification errors

• At the time of hiring, inform employees of their exempt or non-exempt status, review job requirements and descriptions and describe in writing terms of their payment ― for straight time and overtime.
• Periodically review duties performed by exempt employees after they are hired, to ensure they remain properly classified.
• If you find you've made an exempt/non-exempt classification error for an employee, immediately consult your attorney to determine the appropriate remedial action, such as a change in status from exempt to non-exempt and making payments to such employee.

Overtime/off-clock errors

• Adopt clear written policies on schedules and hours of work, and require approval for overtime work.
• Adopt written policies requiring employees to report all time worked, and that you will pay for all time worked.
• Train employees and managers on timekeeping policies and discipline for violations of policy.
• Do not pressure employees to meet deadlines or perform assignments that can only be met by working off the clock. Workload expectations should be realistic.
• Regularly review overtime records. If you find overtime was not paid, pay it immediately, even if work was not authorized.

Record-keeping mistakes

• Implement and disseminate a timekeeping policy. The policy may, for example, require exempt and non-exempt employees to complete time sheets on a weekly basis, and to note meal and other breaks.
• Require non-exempt employees to review and sign their time cards or time sheets every week, and to initial any changes made to them. This is your evidence if sued for an off-the-clock violation.
• Retain time and payroll records for all employees. This will help you quickly correct any mistakes you uncover, and helps work with an employee who says they were short-changed on their paycheck. Also, accurate records are the best defense in a wage and hour complaint.

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