Defensive HR – Preventing Wage and Hour Claims

Wage and Hour claims could be one of the biggest threats employers face. In recent years, there have been an increasing number of high-profile wage and hour claims that were settled on a class-action basis. The Private Attorney General Act (PAGA) gives far more power to the claimant to seek class-action status on behalf of other employees, turning what could be a small case into a business destroying lawsuit.

Wage and Hour claims can be a window into settlement demands by plaintiff attorneys seeking quick settlements. It is not always worth it for employers to take on the legal expense to defend usually multiple claims, centered around a real Wage and Hour claim. CA makes it impossible to recoup legal fees, even if you win. Attorney’s use this to extort settlements from employers who have weaknesses in their HR practices because they know most employers will not expend the legal fees to fight it.

Here are 5 examples of common Wage and Hour claims and ways to reduce your risk:

Unpaid Meals and Breaks

Unpaid Meals and/or Rest Breaks: Every employee has a right to take time to eat lunch and take rest breaks during their shift. If the employer mandates employees to work through lunches and rest breaks, the employee should be paid for that time. Attorney’s frequently use missed Meal Breaks as a central part of claims or settlement demands

Ensure your meal and rest break policy is stated clearly in writing and that the rules are enforced. Unpaid meal breaks must be taken no later than the 5 hour and must be 30 minutes in length. Paid rest breaks must be at least 10 minutes in length, one break for every 3-4 hours worked. If an employee misses a break, pay the one-hour meal break penalty the same pay period.

Working off the Clock

Working off the clock is the new latest “thing”. Working off the clock could be for unpaid meetings or training, working while on a meal break, answering an email or text while off work, and even taking the trash out our setting the alarm after clocking out.  Sometimes these incidents are impossible to defend because the employer does not have a strong policy and accurate time records, and claims can be difficult to disprove.

Be sure to have strong policies with regards to meal breaks and working off the clock. Strong recommendation to use electronic timekeeping with (GPS tracking for remote employees) and never ask an employee to work during their meal break, or answer emails or calls when not on the clock.

Final Pay after Termination

Employees are entitled to all final pay due at the time and place of termination if involuntarily terminated, or 72 hours after voluntarily resigning. Sounds simple enough, but it can be complicated by an ambiguous termination, or by employees who refuse to pick up their final check and wants it mailed, or walks off the job before they receive their final check after being terminated, or a host of other reasons.

The safest ways to terminate someone is to never act hastily, be clear as to whether it is a termination or the employee is resigning, and always be prepared for anything. If you have to abruptly terminate an employee for any reason, hold off until you have their final paycheck prepared. If an employee quits with more than 3 days notice, have their check ready the last day worked. If an employee requests a final check be mailed or direct deposited, be sure to get the request in writing and send it certified mail.

Unpaid Overtime

Unpaid or Underpaid Overtime: In CA, if a non-exempt employee works more than 40 hours in a seven-day period, or more than 8 hours in a day, they are entitled to time and a half for each overtime hour worked. Double overtime when its beyond 12 hours in single day and automatic time and a half on the 7^th day worked.  With regards Makeup Time, there are several rules surrounding both. Makeup time is usually allowed if is requested in writing by the employee and the extra time is worked in the same week the time was taken off.

Be sure to track hours worked, preferably using a timekeeping system, and always pay overtime due the next pay day after it is earned. If you have hourly employees, you should be on a bi-weekly pay schedule to make it easily to calculate weekly overtime.

Misclassifying Employees – Independent Contractors and Salary Exempt

Independent Contractors - AB5 in California has made it nearly impossible to hire independent contractors to do any of your core business functions. There are some exemptions but for most businesses, if it is part of your primary business function, or if you have any control over the employee, it is not advised to outsource this work to an independent contractor

Salary Exempt – Employees who can be classified as Salaried Exempt must fall into one of three categories and generally be paid according to the minimum salary thresholds. The categories are Managerial, Administrative/Professional and Outside Sales. Each have their own rules, but for everything but the Outside Sales position, the employee must be paid no less than 2 times minimum wage, 2080 hours (Full time) salary.

Be sure to properly classify employees, never allow an employee to request a salary for their convenience or set them up as a salaried employee for your convenience. Be sure to understand the rules beyond either of the categories, check our blog post for more information. https://blog.infiniumhr.com/salaried-exempt-vs-non-exempt-employees/

As you’ve seen, there are quite a few reasons for which employees can file wage and hour claims, and these are only a few. The rules are complicated and don’t allow much deviation even if requested by the employee.

What employers must do in order to mitigate the risk from Wage and Hour claims, is to keep meticulous records of employee behavior. The statute of limitations is 3 years, so it’s important to use and electronic timekeeping system, or be sure to keep accurate timesheets and maintain records not just of hours worked, but breaks taken, time traveled for work, and a variety of other data that employers need in order to pay their employees properly.

If you are unsure about your company’s compliance with wage and hour laws, please contact the HR pro’s at Infinium HR.