Paying employees correctly may seem straightforward, but wage and hour laws can be surprisingly complex. Between federal and state laws, even well-intentioned employers can sometimes make mistakes.
Unfortunately, wage and hour lawsuits often involve more costs than unpaid wages. Employers may also have to pay penalties, plaintiff attorney’s fees, interest and spend significant time responding to investigations. Understanding how these claims can arise can help employers reduce their legal risk and maintain compliant payroll processes.
Common wage and hour claims
Wage and hour claims typically allege that employees were not paid in accordance with federal or state law. Overtime violations are one of the most common allegations. Issues may include:
- Misclassifying employees as exempt for overtime
- Allowing employees to work before clocking in or after clocking out
- Not including certain compensation when calculating overtime rates
- Assuming salaried employees are automatically exempt
Because exemption rules depend on both salary requirements and job duties, employers should periodically review exempt classifications rather than just relying on job titles.
Off-the-clock work is another area that is often overlooked. Employees may respond to emails, reply to text messages or complete assignments remotely without recording their time.
If nonexempt employees perform work that the employer knows about or should have reasonable knowledge of, that time may be compensable regardless of whether the work was specifically authorized.
Employers should establish clear policies requiring employees to record all hours worked and ensure that managers enforce them.
Misclassification
Employee misclassification is another area that creates significant wage and hour exposure. Common examples include categorizing workers as independent contractors when they should be classified as employees and classifying employees as exempt when they don’t meet the applicable exemption requirements. Misclassification claims often involve allegations of unpaid overtime, payroll tax issues and employee benefits disputes.
Most wage and hour lawsuits arise from routine workplace practices rather than intentional misconduct. Working with a legal professional can help employers identify potential vulnerabilities, address concerns and reduce the risk of costly litigation.