Recent news headlines such as “Retailer Hit With $172 Million Verdict Over Missed Meal Breaks in California” and “$89 Million Overtime Settlement for Financial Advisors and Trainees” can strike fear in even the most seasoned human resources professionals.
Plaintiffs’ lawyers pursue these claims aggressively by advertising for clients and their recruitment efforts are often successful. In fact, these types of wage hour class-action lawsuits are growing in Wisconsin exponentially and now outnumber employment discrimination cases.
Employers of all sizes can be at risk when it comes to employee compensation issues, because policies have not kept in step with recent changes in federal and Wisconsin law. Some of the most common traps that employers fall into can be avoided if companies follow some tips:
1. Be aware that salaried employees may not be exempt from overtime pay.
There is a common misconception that employees paid a salary are automatically “exempt” from overtime pay. Employers must consider whether the employee actually performs duties that would meet the requirements of one of the various exemptions. Job titles and job descriptions are not conclusive, so employees’ actual duties must satisfy the exemption requirements.
2. Watch for improper salary deductions.
An employee who is paid on a “salary basis” means that they receive the same amount each pay period, regardless of the number of hours worked. The salary is not subject to deductions, such as if an employee misses a half day of work, other than in very limited situations, such as if an employee misses a full day of work for personal reasons or for illness after having exhausted available sick leave. Also, improper deductions from one employee’s salary can jeopardize the exempt status of all employees who are also subject to such deductions.
3. Be aware of hourly employees’ off-the-clock work.
Employers are required to pay non-exempt (hourly) employees overtime for any time worked over 40 hours in a given work week, even if the employer did not request that the employee do the work. This includes overtime required by a “rogue” supervisor without the company’s knowledge and work performed at home with PDAs, laptops and BlackBerry devices.
4. Be conscious of work during meals or break periods.
In Wisconsin, employees generally must be paid for breaks that last less than 30 minutes. If your employees have any duties or are interrupted to perform work during a longer, otherwise unpaid break, the entire period must be paid. If employees are required to remain at their desks or workstations during lunch, for example, they must also be paid for the time.
5. Ensure time is rounded evenly.
Employers may round employees’ start and stop times to the nearest five minutes, one-tenth, or quarter hour, but the rounding must occur evenly. Rounding that only occurs in the employer’s favor is a violation. When you consider that it could occur daily and for many employees, the liability could add up quickly.
6. Enact comprehensive compensation policies.
Clear and comprehensive policies that set forth the rules and create a mechanism for employees to report potential violations will reduce the risk of violations and assist in your company’s legal defense.
7. Maintain accurate time records.
Keeping accurate records of the hours employees worked guards against meritless claims and minimizes exposure in the event of valid ones. Time-recording policies should be in writing, and employees should know how to report time, what time is compensable and what is not, and what to do if they believe they need to work additional hours.
8. Perform self-audits.
Performing periodic, preventive audits of exempt classification, payroll practices and off-the-clock issues will help identify problems before they turn into claims in litigation. Review exempt positions, focusing on actual duties performed and the percentages of time spent performing them.
9. Train all employees
One of the most important ways employers can avoid claims is to provide training to all employees. In particular, supervisors, whose actions often result in costly violations, must understand proper implementation of policies and procedures. They can identify and correct potential problems and are key witnesses in any litigation over violations.
With ever-changing regulations and growing litigation, it is important that employers keep abreast of changes in the laws and get a handle on any problems as quickly as possible to keep themselves out of the courts and the headlines.
