When it comes to running your business in compliance with the law, there are certain practices that are firm no’s, and other practices that are arguably more inconspicuous.
The difference between conducting your business legally and illegally can sometimes be a matter that comes down to the exact details. Here are five labor law violations you might not even know you’re committing:
Making Illegal Deductions
Employers are allowed to deduct certain expenses from employee wages as long as the post-deduction wages don’t dip below minimum wage. However, state rules can differ on what can legally be deducted.
Take, for instance, the law regarding deducting cash register shortages from employees’ pay. Under federal law, employers can deduct cash register shortages from the paychecks of employees presumably responsible for the loss, unless the worker earns minimum wage.
However, some states offer employees more protections, like only allowing employers to make a deduction if the employee admits to being responsible for the loss or shortage. Other states, like California, require employers to prove that the employee “acted dishonestly, willfully, or in a grossly negligent manner,” in order to deduct the loss from wages.
Inadequate Record Keeping
Failing to keep accurate records of all hours worked is a labor lawyer’s dream. By federal law, employers are required to keep verified timekeeping records and payroll information, such as timesheets, work, and time schedules, and records of additions to or deductions from wages.
Records on which wage computations are made must be retained for two years by federal law, though state laws may have further stipulations on the length of time records are required to be kept. As a business owner, one of your top priorities should be to make sure employees are provided with a system they can use to accurately report their hours.
If an employee monitors their own hours secretly and can prove a false reporting of hours, they have every right to file a labor complaint.
Improperly Calculating OT or Delaying the Payment of OT Hours Until a Future Pay Period
Under the FLSA, non-exempt employees are entitled to overtime at a rate not less than one and one-half times their regular rate of pay after working over 40 hours in a workweek.
As long as the employee has a fixed and regularly recurring period of 168 hours (seven consecutive 34-hour periods) they work, this can count as the workweek, regardless of whether their workweek actually coincides with the calendar week.
As a rule, overtime pay must be paid along with the rest of the wages earned for that pay period on the regular payday and cannot be pushed to a later pay period in the future. Also, overtime is based around the workweek – weeks cannot be averaged together, such as only paying overtime if an employee works over 80 hours in a 2-week period.
Again, states often have their own local overtime rules and exemptions.
Unpaid Compensable Time
Employees must be compensated for all the time they work, which might be more difficult to classify than you would think.
For instance, if an employee reports working 20 minutes early each day because of a commuter schedule, you must compensate them starting from that minute if they start work at that time.
Similarly, if an employee stays late at work, even if they have not received permission to do so, they must be compensated for the time they worked. Employers can also get into hot water with time rounding arrangements if they don’t tread carefully.
According to the law, rounding time the arrangements must average out so that all the time worked by the employee is properly counted. We have an in-depth article on rounding rules. We also have an article on how to address employees frequently and purposely working overtime.
Improper Designation of “Exempt” Employees
If you have exempt employees that are not entitled to receive overtime pay, the burden is on you to prove it. Most employees have entitled to overtime pay thanks to the Fair Labor Standards Act (FLSA), but not all.
According to the FLSA, there are seven major categories of exempt workers – executive employees, administrative employees, learned professional employees, creative professional employees, computer employees, highly compensated employees, and outside sales employees.
There are dozens more exemptions, and whether an employee is exempt from overtime can be determined based on their salary level and job duties. Type in “Fair labor standards act exempt employees fact sheet” to pull up multiple fact sheets that provide general information regarding the vast multitude of employees exempt from Section 13(a)(1) of the Fair Labor Standards Act.
Again, sometimes it can be confusing to discern which business practices fall out of bounds, legal-wise. However, it’s important to know the labor rules that govern employee-employer work relations. Being informed means you are always conducting your operations in a lawful manner, and maintaining an ethical business.