Tuesday, September 9, 2014

More of the Top Ten Practices to Avoid Employment Liability

Yesterday we posted three of the top ten practices to avoid employment liability. We noted that while there is no way to stop employees or applicants from making claims of unfair employment practices, employers can work to reduce those claims and “employ defensively” so that they are in the best position possible to defend such claims and avoid liability. We continue our list today with the following.

4.  Pay Your Employees Correctly

Wage claims can be very expensive. Not only does the employer pay its own attorney’s fees, but if found liable, the employer can pay damages in the amount of double the wages owed, interest on the unpaid amount and the employee’s attorney’s fees. Further, the Fair Labor Standards Act is a “strict liability” statute, meaning that an employer’s good faith or “honest mistake” is no defense to liability. This should be a huge incentive for any employer to ensure that they’re paying their employees correctly.

Wage liability generally arises in two ways: when employers have incorrectly classified their employees and when employers either don’t pay overtime or don’t pay it at the right rate. We posted yesterday about an employer’s need to periodically audit certain job titles to ensure that they are classified correctly. The determination does not turn on the job title, but rather the duties. For instance, an IT Manager whose responsibilities are really limited to troubleshooting is probably not exempt. (information technology employees present some of the trickiest issues for employers because those employees are often expected to be “on call” 24/7 for emergencies, but often not paid for responding to these off duty emergencies).

We have previously posted on an employer’s need to use interns appropriately. Today the news reports of a class action claim against The David Letterman Show by a group of “interns” who claim that they were really employees throughout their “internship”. If their claims are valid, the  Show may owe not only at least minimum wage for all of the hours worked, but time and one half for any hours over 40 in a week, plus double that and interest and attorney’s fees.

Another situation that often catches employers unaware is when a job, which was previously clearly exempt, changes because of new technology, a different employee filling that position or growth or change in the organization. For example, a department is formed (maybe an IT department) and an employee is designated “in charge” and for a number of years that employee supervises the employees and manages the work of the department. The only problem is that the department continues to grow and the employee “in charge” is not really qualified to manage the growing operation. The employer reorganizes and hires someone else to manage the operation, changing the duties of the original employee in charge. That employee may no longer qualify for exemption from overtime due to the reorganization, and a pay adjustment is required.

The second way in which employers are generally found liable in wage claims is when they have calculated overtime incorrectly. While it’s a pretty straightforward calculation of time and one-half pay for every hour worked over 40 in a week in most instances, the trick arises when an employee works at more than one job. The issue often presents itself when an employee, maybe a water operator, also referees games for the parks department at night during the summer. The employee works 40 hours as a water operator at $35 per hour and then an extra 10 hours during the summer for the parks department at $10 per hour.  This requires a calculation of overtime pay at the “blended” rate of the hourly rate of both positions, regardless of what the employee was working when he or she exceeded 40 hours in a week.
Of course, the question that follows is what to do if an employee wasn’t paid correctly. The answer, though, is simple. An employer should just calculate how much is owed and pay it to the employee. Did we mention that damages in a wage claim can be double the wages owed, interest and attorney’s fees?

Wage issues are often complicated. Employers should consult with their attorneys to ensure not only that their employees are classified correctly, but that overtime is calculated at the proper rate. The labor and employment attorneys at Ancel Glink are available to advise and guide employers to ensure that their pay practices comply with the law. Contact Margaret Kostopulos or any of the labor and employment attorneys at Ancel Glink to discuss how we can you’re your organization.