Two costly cautionary tales that made recent headlines should send a chill up your spine and then running to double and triple check your wage and hour compliance.

In one case, an Indiana trial court has awarded $42.4 million to current and former Indiana state employees who were required to work 40-hour workweeks from 1973 until 1993, even though other state employees holding the same positions were required only to work 37.5-hour workweeks for the same pay.

The judgment is believed to be among the largest class action judgments against the state in its history.

In another case, Northwestern Mutual Life Insurance Co. is faced with a $200 million lawsuit by former employees accusing the company of failing to pay rightful overtime wages under state and federal law. The employees claim they were wrongly classified as “independent contractors,” saying they were paid less than minimum wage and forced to work more than 40 hours per week.

In cases like these, you can lose even if you win. To keep pros from falling into wage and hour traps, Wendy E. Lane, an attorney with L.A.-based Rutter Hobbs & Davidoff, offers the following tips:

* Employee classification: Get it right. For example, to be exempt from receiving overtime pay, meal periods and rest breaks, employees must meet certain wage requirements and fulfill certain duties. Simply paying an employee on a salary rather than hourly basis does not automatically make an employee “exempt.” Similarly, the determination of whether a service provider is an independent contractor depends on a careful analysis of a number of factors, including the service provider’s level of discretion in completing his or her job.

* Recognize the different levels of management. Just because employees have the word “manager” or “supervisor” in their job title does not necessarily mean they qualify as exempt. For instance, if a “manager” or “supervisor” is required to consult a senior supervisor on all decisions, the employee may not technically meet the criteria for exemption. Employers should err on the side of caution when classifying employees at the management level.

* Beware of vengeful former employees. In the aftermath of financial cutbacks nationwide, disgruntled ex-employees are even actively seeking out reasons to sue their former employers as a means of collecting cash. Some are claiming they were misclassified as independent contractors and therefore deserve to receive unemployment, while others are claiming they were wrongly labeled as “exempt” and hence deserve payment for all overtime and meal periods.

* Know the industries targeted by wage and hour disputes. While all employers should absolutely play by the rules, employees in the restaurant, retail, insurance and sales industries have filed a disproportionately high share of the class actions plaguing employers of all sizes. Companies in these lawsuit-sensitive sectors must be particularly conscientious with their employee classifications.

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