As if making rapid-fire changes to your company to survive a pandemic wasn’t hard enough, experts suggest that these same changes are landing some businesses in trouble for wage and hour violations. A group of Blank Rome attorneys noted that “several trends have converged in the wage and hour space at present,” including changes in the way jobs are performed, a lapse in reviews and audits to timekeeping and payroll systems, and errors on the part of payroll processors to calculate regular rates of pay.
Below, we outline the most common wage errors attorneys are seeing and what you can do now to stay on the right side of the law.
Keep up with off-the-clock claims:
These wage errors typically occur when employers make edits or reductions to their timekeeping systems, such as automatic deductions for lunch breaks or other adjustments to the workday. Businesses are likely seeing an uptick in these types of cases simply because, in this post-pandemic environment, more folks are working non-traditional office hours to work around childcare and other obligations.
The Fix: Luckily, there’s a two-pronged approach that, while tedious, should knock out these types of claims. The first step is to have business owners — or whoever is responsible for payroll — ensure that the records accurately reflect time worked. If someone skips a lunch break, for example, the employee will need to fill out an exemption form that is reviewed by their manager and filed accordingly. The next and final step is to have all employees AND managers sign off on edits made to the traditional time-keeping system so that both parties agree to the final copy of the time record ultimately finalized and there isn’t fodder for a lawsuit.
Reminders on regular rate claims:
The lawyers note that regular rate claims have also been on the rise in recent years. This occurs when large groups of employees who are not exempt from receiving overtime pay end up with extra payments — such as performance-based bonuses or other pay-outs — on top of their regular pay rate. Now, these employees are certainly eligible to get the extra chunk of change, but employers have gotten into hot water when they’ve failed to include such pay-outs in their calculation of employees’ regular rates for overtime purposes.
The Fix: Again, a simple fix here, but one that is very easy to overlook, especially if you aren’t accustomed to offering your employees boosts in compensation. Employers just need to make sure that every penny of every monetary bonus, perk, and the payout is included in their employee’s “regular rate of pay” calculations and incorporated into future overtime pay equations.
Don’t miss misclassification claims:
Perhaps the easiest wage law to mess up in this post-pandemic world is misclassifying your employees. With all the changes that businesses have made — both to their overall mission and the roles and responsibilities of their employees — it isn’t at all unexpected that your payroll folks would perhaps forget to update their classification. One example the lawyers give is that of a company that had a large outside sales workforce pre-pandemic who must now reclassify their workers who now execute their tasks almost entirely from the comfort of their own homes. Similarly, remote workers who have moved out of your local region may be subject to different local or regional employment rules and regulations.
The Fix: Again, this won’t be tricky to implement but can surely be tedious! You’ll just need to make sure that your payroll folks have checked in with your employees to verify their classification, as well as their demographic and any other information that may impact how they are classified for payroll purposes. In addition, you’ll want to make managers — and employees! — aware that they need to report any changes in a timely fashion to avoid getting the company in trouble.
Now, the lawyers note that many companies that have found themselves on the receiving end of a lawsuit are opting for arbitration agreements to settle the claims. However, we here at Abel HR prefer a much less risky strategy: Partnering with a Professional Employee Organization (PEO). PEOs such as Abel professionally manage your payroll, making sure that your employees are classified correctly, that exemptions are being made appropriately, and that pay is being calculated based on the most up-to-date information. Of course, Abel HR takes it one step further by having a certified accountant review and approve every single payroll so that should an issue ever arise, it falls on us and not you.
