Wage and hour compliance can pose serious legal challenges for employers. Laws are always evolving, requiring constant vigilance. Even small errors can lead to costly lawsuits, penalties, and unhappy employees. Implementing effective practices helps minimize these risks, ensuring fairness and compliance in the workplace.
This article offers guidance that can help you as an employer manage wage and hour issues effectively and reduce potential claims and legal risks. Learn more by reviewing the Department of Labor’s FLSA reference guide for employers.
Develop Clear and Consistent Workplace Policies
Communicating policies regularly to employees can help reduce potential wage and hour claims by helping them understand how wages are calculated, overtime rates, deductions, and timing of payments. Include wage and hour policies in employee handbooks or another central place where employees can access and review information.
Examples of best practices for developing wage and hour policies include the following:
- Set clear work hours. Define the regular hours employees are expected to work and communicate how requests for schedule changes or extra hours will be handled. Establishing a consistent work week can also help you calculate employee wage rates and overtime correctly. With the rise of remote work, you may need to establish additional guidelines for work performed off-site or at irregular times by remote employees.
- Define key wage and hour terms. To avoid potential misunderstandings, clearly define important terms and concepts, such as “work week,” “regular working hours” (e.g., 9 a.m. to 5 p.m., Monday to Friday), “overtime hours,” “on-duty time,” “on-call time,” and “exempt and nonexempt employees.”
- Outline time tracking expectations. Explain how employees are expected to track their hours, such as using time clocks, manual time logs, or mobile apps. This can help ensure all hours employees work are accurately tracked and accounted for.
- Clarify break times. Establish clear policies on paid and unpaid breaks, lunch hours, and how employees should record this time on their timesheets. This can help prevent confusion among workers and reduce potential violations.
Conduct Regular Training
Managers are often on the front lines of implementing and enforcing an organization’s wage and hour policies. If these individuals are not well trained, it can easily lead to costly violations. Manager training can cover topics such as overtime eligibility, employee classification (e.g., exempt versus nonexempt employees) and timekeeping practices. Additionally, train supervisors to avoid practices that may lead to costly violations, such as pressuring employees to work through breaks or off the clock.
Ensuring employees are properly trained can drastically improve your organization’s wage and hour compliance efforts. At a minimum, employers should train employees at the time of hire and every year thereafter. In addition to regular training, providing employees with guides and resources can help improve their knowledge about wage and hour regulations and workplace policies and enhance organizational compliance.
Ensure Accurate Recordkeeping
Proper recordkeeping is a critical component in reducing potential wage and hour claims. Under the Fair Labor Standards Act (FLSA), employers are legally required to keep certain records for each nonexempt employee. While the FLSA does not require employers to keep these records in a particular form, it does require the records include certain identifying information about the employee and data about the hours worked and the wages earned. The law requires this information to be accurate.
Here are steps you can take to ensure accurate recordkeeping:
- Track hours worked. Accurately track employee hours. Using reliable time-tracking systems can help ensure your time records are correct and reduce the chance of errors.
- Maintain detailed records. Keep records of hourly rates, overtime payments, bonuses, deductions, employee breaks, total hours worked, and any other required compensation details.
- Provide employees with access to time records. Another way you can ensure your time records are correct is by providing employees with access to their time records. Providing employees with this information can help you identify and correct errors.
- Retain records for the required period. You can remain compliant with wage and hour recordkeeping requirements by understanding how long records must be kept. According to the FLSA, payroll records must be kept for at least three years, and records related to wage computations must be kept for two years.
- Review wage and hour records. Regularly reviewing and auditing records can help you identify potential wage and hour issues and address them before they turn into expensive legal matters. Auditing payroll processes, employee classification, and organizational compliance with wage and hour requirements can help your organization stay on the right track and one step ahead.
Address Employee Complaints Promptly
Despite an organization’s best efforts to comply with wage and hour laws, employers may still be subject to employee complaints. Taking employee wage and hour complaints seriously and resolving issues quickly can prevent internal complaints from becoming formal legal actions. This can help reduce the risk of the same wage and hour issues reoccurring in the future.
Encourage employees to report any wage and hour issues by establishing a clear reporting process. After receiving an employee complaint, it’s important to investigate the issue thoroughly. This may include collecting relevant information and documents and interviewing employees. Once an investigation is completed, implement corrective action to resolve any issues promptly.
After resolving any potential issues, communicate the findings to the employee who raised the issue. After resolving the complaint, you may need to update policies and procedures and provide employees with additional training to prevent future instances of noncompliance. In some situations, it may be necessary or prudent to report the incident of noncompliance to the appropriate government agency.
By addressing wage and hour complaints promptly, you can reduce the risk of legal and financial issues and build a stronger, more trusting relationship with your employees. An effective corrective action plan should facilitate your organization’s overall wage and hour compliance goals. This includes identifying the cause of the issue, implementing steps to correct the issue in a timely manner, reducing the risk of the issue reoccurring in the future, and establishing accountability.
Establishing best practices to reduce wage and hour claims can enable employers to foster a culture of compliance that can not only help organizations avoid potential liabilities but also build trust and morale among their workforce, contributing to a more productive and harmonious work environment. For more guidance on this topic, contact your Leavitt Group insurance advisor. Learn more about human resources support we provide our clients at https://www.leavitt.com/lg/ins/hr-support-services.
