10 Minor Mistakes That Can Get an Employer into Big Trouble
Minor mistakes can lead to big trouble when it comes to how you manage your employees. From failure to keep company records to sharing an employee’s health information with others in the workplace, the number of ways employers can drop the ball is seemingly endless. Worst of all, these “minor” mistakes can lead to major consequences.
We consulted with several experts to advise you on the top ten minor mistakes that could lead to trouble down the road:
1. Failing to timely pay a dismissed employee.
If an employer fails to provide timely payment of wages (regular pay, overtime wages, and vacation pay included) to a dismissed employee, the employee has the right to file a wage complaint which could lead to an investigation and potentially, a lawsuit. According to Attorney Eric D. Anderson of Eric D. Anderson Law, Ltd., who practices law in California, “When an employee is fired all wages are due at the time of termination. So employers can’t fire someone and then pay them two weeks later. Employees who quit must be paid within 72 hours.” This is specific to California law, but other states have similar provisions.
2. Failure to keep time records.
Federal law establishes that employers must keep accurate records of time worked for each nonexempt worker. If an employer cannot produce these timekeeping records, the consequences could be dire. “Employers must maintain personnel records and keep them for at least 3 years under CA law,” says Attorney Anderson. “Other states have similar provisions. If they don’t, they can face penalties of $1000 per violation. Payroll records must also be kept for 3 years.”
3. Treating workers as independent contractors because they asked to be treated that way – besides, it’s just easier.
Independent contractor classification — whether requested or not — must be determined based on duties and the extent to which work is controlled. “Make an individual assessment if the worker is an employee or independent contractor based on a number of factors including how much control the company has over the worker,” says Colleen M. McCarthy, an Employment Lawyer and Partner of the Employment Law Practice Group Ferruzzo & Ferruzzo, LLP. “The worker’s preference will not matter to the IRS, state taxing authorities, or other government agencies looking at the employment status.”
4. Complimenting employees on anything not work-related.
Offering a compliment or two may feel like you’re brightening an employee’s day, but depending on the manner of the compliment, it can possibly be misconstrued. “Complimenting employees on their manner of dress or physical appearance or sexual history is an invitation for trouble,” says Attorney Anderson. “Employers may talk about wanting a ‘team environment’ where everyone is comfortable with each other, but all it takes is ONE employee who is not comfortable with talk of a non-work-related nature and you have a slew of problems.”
5. Sharing an employee’s health information with others in the workplace.
“I once had to talk to a manager who stated about another employee, ‘Oh she’ll be out for a while due to stress and mental issues,’ says Personal Development Coach Stacy Roberts and Owner of SMR Leadership Solutions, “My mind was blown, I had to quickly advise him of the dangers of discussing his employee’s private health with his other employees. I find that what we may think is common sense is not so common to others.”
The Health Insurance Portability and Accountability Act of 1996 (HIPPA) prohibits employers from discussing an employee’s medical-related information with other employees. Disclosing this information outside of a need-to-know basis is illegal and could result in possible penalties and fines under HIPAA and the Americans with Disabilities Act (ADA).
6. Not keeping track of meal and rest breaks (in California) because it’s too time-consuming.
Meal and rest break compliance is a must for every employer, especially in the state of California, which mandates employees receive a 30-minute meal break if working more than 5 hours in a workday, and a 10-minute break for every four hours worked. “Employers are required to maintain records and without them, it is very difficult to defend an employee’s claim that meal and rest breaks were not provided on time or at all,” comments Lawyer McCarthy. Fingercheck’s automated time and attendance software takes the burden of compliance off employers and can regulate meal and breaks so that they operate in compliance with state law.
7. Ignoring local rules that pertain to your employees who work remotely.
If you hire a remote employee in a different state or region, you’ll need to lookup local compliance regulations in order to comply with the applicable laws. “More and more local city and county municipalities are passing their own local laws affecting minimum wage, paid sick leave, and other terms and conditions of employment,” says Lawyer McCarthy. “Those terms apply to employees working remotely in those locations, quite often. It is important to identify all local laws where your remote employees work to determine if they apply to your workforce.”
8. Paying all employees a salary and treating them as exempt because it’s too difficult to keep track of overtime.
It may be more convenient to make all your employees salaried in order to avoid having to keep track of overtime or (even worse) pay overtime, but paying an employee a salary does not automatically make them exempt. Job titles alone are insufficient in establishing the exempt status of an employee. They must perform exempt job duties, have responsibility for other employees, and work at the professional level. “Make an individual assessment for each employee to determine if the employee is exempt from overtime requirements or non-exempt,” advises Lawyer McCarthy, in order to avoid a wage and hour lawsuit.
9. Not clearly distinguishing between that which is the policy and that which is a contract.
“Employee manuals consist of company policies and can be changed at any time,” states Attorney Anderson. “They are not negotiated generally (union shops are a different story) and are unilaterally determined by management. They are not promises. The company is free to change them as it sees fit and consistent with the law. Dress code, for example, would be a policy. Casual Fridays can be eliminated without gaining permission from an employee.
Contracts, on the other hand, are negotiated between the parties and create obligations for both. Salary changes, for example, must be done in a manner consistent with the contract, if any. Contracts also may make clear the terms of employment, including at-will status.”
10. Not having an employee manual.
The creation of an employee manual provides employers with the ability to define policies early on and have employees consent to complying with them. “Every employee must sign an acknowledgment that he or she received that manual and will familiarize themselves with the contents of that manual,” explains Attorney Anderson. “This way, every employee is on notice as to the company policies for discipline, harassment, scheduling, absences, etc.”
When you’re an employer, it’s important to stay ahead of the curve and sidestep potential trouble early on. We hope this roundup of tips will help you avoid mistakes that are potential land mines. Thanks to Attorney Eric D. Anderson, Employment Lawyer Colleen M. McCarthy, and Certified Executive and Personal Development Coach Stacy Roberts for their contributions.