As a business owner, it is your duty to compensate your workers fairly. You may pride yourself on adhering to federal and state labor laws that some companies try to skirt. Yet, even your best efforts may not keep a disgruntled employee from filing a wage and hour claim against your business, alleging unfair pay or overtime practices. These claims often resolve in favor of employees, so you must understand how your business can avoid them.
Check exemption statuses
Some employers misclassify non-exempt employees as exempt to avoid paying them overtime wages. Unless an employee earns a salary, or unless they perform administrative, professional or executive duties, they will qualify as non-exempt under the Fair Labor Standards Act (FLSA). By misclassifying employees, they may be entitled – if they have worked overtime – to pay that they have not received. To avoid a claim, then, you must make sure you have a firm understanding of your employees’ duties. You can use this information to create accurate job descriptions, which you can keep on file to help you stay in compliance with your employees’ exemption statuses.
Keep detailed records
Under the FLSA, you must keep three years of records for every non-exempt worker your business employs. You must also keep payroll records for your exempt employees, though you do not need to record their hours worked.
For all non-exempt employees, you must document, by law:
- Their personal information
- The number of hours they work per day and per week
- Their hourly rates and earnings
- Their overtime earnings
- Any additions to or deductions from their wages
- Their total wages per pay period
- The date you paid their wages and the corresponding pay period
By keeping records, you can make sure all your employees receive adequate compensation for the work they perform. If your business does face a claim, consulting these records can help you determine whether it has merit.