8 wage and hour mistakes that could cost millions

From overtime rules to biometric timekeeping, a patchwork of laws and regulations can make compensation benefits a tricky business for employers. Danielle Hultenius Moore, a partner with Fisher Phillips, recently discussed with employers some red flags and pipeline laws benefit managers should monitor.

“The unfortunate thing about wage and hour is it's entirely preventable,” she said at the Society for Human Resource Management’s annual conference in Chicago. “You’re talking about millions of dollars. When you get one of these claims it can be catastrophic to the business.”

The following instances are areas Moore believes employers can really home in on to help avoid risk.

Off-the-clock work

“There is a common misconception that the company is properly keeping track of time,” Moore said. Depending on some states, even going through security can count as compensable time. And while most don’t, things like turning on a computer, time clock malfunctions … depending on how pervasive it is, there could be an issue.

She advised employers keep accurate timekeeping policies and to update and maintain them as laws change. Train employees and supervisors to know everything on timekeeping. Does your timekeeping system round, if so, does it round evenly and fairly, she advises. Investigate and review your records for accuracy.
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Pay equity

The misconception here is employers believe they don’t discriminate so there must be no reason to worry about pay equity compliance, she said. This area of compliance has been especially hot with the EEOC, even though these laws have been on the books for years. Self-evaluate your pay equity policies. “You can’t wait,” she warned “Do it now, because employees are talking and aware. They’re going to come to you and before they do, do you have your ship in order?”

And she advised employers to look beyond just hourly rates and salary; evaluate bonuses, incentive pay and benefits. Additionally, identify jobs that are comparable and look for possible discrepancies there. For example, she said, a janitor versus a housekeeper.
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Independent contractors

If you get this wrong, you’re talking about minimum wage, overtime, and something you don’t get with other claims: taxes. This means withholdings that come with being an employee you haven’t been paying, she warned of misclassifying contractors. “If there is one entity you don’t want to ever be up against, it’s the IRS,” she added.

The traditional test employers can use to evaluate there is if there is a “right to control,” she said.

As an example, in Massachusetts, an independent contractor must be:

· Free from control and direction in connection with performance of service, both under contract and in fact
· Performs service outside the usual course of business of employer
· Customarily engaged in independently established business of same nature involved in service performed

Vet contractors and vendors and audit existing contracts, she advised. Additionally, have written independent contract agreements and follow them, she added.
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Minimum wage and overtime

While the heat Obama-era overtime rules has cooled since the Trump administration came into power. However, employers still have to remain vigilant. Three common areas employers keep an eye on include regular rate calculations, misclassifications and commissions, said Moore.

Regarding rate calculations, unless salaries employers are owed 1.5 times their regular rate of pay for all time worked in excess of 40 hours, she said. This includes all remuneration for employment except certain payments excluded by the FLSA, including PTO, vacation pay, sick pay, gifts etc. That means, she noted, overtime rates must include commissions, salary, piece rate, nondiscretionary bonuses and incentives.

And the classification of employees is also paramount. Just paying a salary doesn’t mean a worker is exempt from overtime. “Exempt” means not subject to certain FLSA requirements, she said.

And misclassifications can come at a cost. For an example, a former employee was paid a $60,000 salary, worked 50 hours per week for one year and paid biweekly.

In that scenario, there was $22,500 of unpaid OT. For a class of 100, that means $2,250,000 without any penalties, interest or attorney fees, she said.

Employers should audit exemptions and to follow up with payroll to ensure they are performing regular rate calculations properly, and including all wage types.

Arbitration agreements

The recent Supreme Court ruling found class action waivers in employment arbitration agreements do not violate the NLRA and are, in fact, enforceable under the Federal Arbitration Act. Employers should consider whether arbitration agreements with class action waivers are right for your business, and if so, be thoughtful when rolling out and to consult with counsel on opt out language.
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Predictive and fair scheduling

This is very trendy right now, and making its way around the country, she said. It is designed to assist and protect workers from unpredictable shifts and surprise shift cancellations. The theory is that it would help with arranging things like child care, and avoid canceled shifts which could lead to financial insecurity.

San Francisco, Seattle, New York City and Oregon have laws either in the books or recently passed and similar legislation is being considered in 13 states and four municipalities, she noted.

PAGA clones

The Private Attorney General Act, or PAGA, is a statute that authorizes private litigants to bring an action on behalf of public law enforcement agencies against employers for violations of the California Labor Code. As noted before, the Supreme Court rules class actions in arbitration agreements are valid. However, unlike a class action waiver, an employee may not waive a claim under PAGA because such a claim is representative and is an enforcement of civil penalties on behalf of the state rather than the individual. Rumor, she said, is there are several other states with similar laws in the works, and should be something to keep on the radar.

Biometric timekeeping

“This is super new and super cutting edge,” Moore said. “But the word on the street is this is the next class action battleground.”

There are three statutes on the books that directly regulate biometric information privacy, she noted, with Illinois being the most aggressive, and Texas and Washington’s being less comprehensive.

“Know if you have biometric time keeping and start using consent forms,” she advised. “Or if you are instituting biometric timekeeping, be aware of what’s coming down the line.”