“Forewarned is forearmed,” goes the old saying. And it’s definitely true where wage and hour law is concerned. To minimize our wage and hour liability, what should we be focusing on for 2014?

Worker Classification

There are many incentives for employers to classify workers as contractors, including savings on taxes, paperwork reduction and more. But strict criteria must be met for that classification to be valid.

For several years now, employers have been under the microscope as various agencies look for employees who have been misclassified as “independent contractors.” All indications are this will continue to be a big issue in 2014.

In 2011, the Department of Labor (DOL) and the Internal Revenue Service signed a “Memorandum of Understanding” (MOU) pledging to share information to help identify employers who have misclassified their workers. In addition, 15 states (so far) have also signed MOUs, also agreeing to share information, leads and referrals with each other and the federal DOL. New York was the most recent addition, signing on to the initiative in November 2013. More states are expected to sign on in the future.

Action item: If you have any workers you currently classify as contractors, carefully review their situation to make sure that classification is correct.

Internships

Several lawsuits were filed in 2013 on behalf of unpaid interns, claiming they were actually performing compensable labor and should have been paid. In most cases, the courts ruled the interns were right — they were actually serving as unpaid employees and should have been compensated.

Because of the publicity these cases received, we can expect more such cases to emerge in 2014.

Just as with worker classification, there are strict criteria that must be met in order for someone to be classified as an unpaid intern. If the “internship” doesn’t meet those criteria, the workers must be paid at least minimum wage.

Action item: Don’t count on unpaid interns as a source of free labor. Your best bet to avoid potential liability is to pay interns at least minimum wage.

Off the Clock Work

These days, it seems almost everyone has a laptop, smartphone or tablet (or all three). They’re incredibly convenient, but they open employers up to potential wage and hour liability. If your overtime-eligible employees use their mobile device to check email or do a bit of work in their off hours, you need to make sure they report those hours so you can pay them.

The problem: sometimes employees think they’re doing you a “favor” by not reporting all their time. They think they’re saving you money. But in the long run, their “favor” could end up costing you big, when you find yourself on the hook for overtime penalties for underpayment.

Other times, it’s just too inconvenient to record their time, so employees simply “opt out,” deciding it’s not worth the trouble. All it takes is one disgruntled worker complaining to the state or federal labor department, though, and you could be facing huge liabilities for unpaid overtime.

Mobile devices are becoming less expensive and their use more widespread. It’s likely you’ll find more of your employees than ever working outside the office in 2014. Prepare now to avoid liability later.

Action items: Communicate a formal policy prohibiting off the clock work. If your employees are permitted to work outside the office, provide an easy method for them to record their hours, and be sure to pay them for all their work time. For instance, you could set up a web-based system such as AcroTime, which allows your employees to clock in and out over the web or over the phone.

Class Actions

We’ve heard a lot of good news (and a bit of bad news) in the area of class actions over the past few years.

Some of the good news: in the wake of the Supreme Court’s 2011 Dukes v Wal-Mart decision, it’s been harder to certify large class action lawsuits. One result has been an increase in suits filed on behalf of smaller classes; one quarter of class action suits now involve classes of fewer than 1,000 people.

More good news: according to a study compiled by NERA Economic Consulting, thanks to smaller class sizes the total dollar amounts of class action settlements have declined from their high in 2007 and have stabilized over the past several years.

Bad news: the average settlement amount seems to have stabilized at nearly $5 million each. And the settlement per participant has risen, reaching about $6,300 in 2012.

The study also reveals about 39% of class action suits involve overtime, while missed lunch breaks, misclassification and off-the-clock work comprise 16% to 18% each. (Note: many suits include multiple allegations.)

Action items: To minimize the chances of being hit with an expensive class-action lawsuit:

  • Prohibit off-the-clock work;
  • Make sure employees are paid for any missed lunch breaks;
  • Ensure workers are classified properly between employees and contractors; and
  • Be sure to accurately record all work time so you can pay for all worked overtime.

You may also wish to include a valid, enforceable arbitration clause in your employee handbook or employee agreements. Properly worded, an arbitration agreement can head class action cases off at the pass.

Conclusion

The Dukes v Wal-Mart case did not spell the death of the class-action employment lawsuit. Class action suits continue to pose a threat to businesses in 2014 and beyond. To protect your business, it’s crucial to ensure your workers are properly classified and that they’re properly paid for all time worked (including time worked outside the office).

If you have any doubts or questions about your policies or procedures, consult your employment law attorney. Wage and hour laws are complex and constantly changing. Your employee handbook and policy manual are not do-it-yourself projects.

Finally, one of your strongest lines of defense can be a good time and attendance tracking system. Ideal: a solution that makes it easy for employees to clock in and out, no matter where they are, such as our AcroTime online time clock. To be safest, track time for all workers, employees and contractors.

If you need help picking out the system that will work best for you, contact Acroprint. We offer one of the most complete line of time and attendance products in the industry, so we’re sure to have a solution that will meet your requirements. Our trained customer care representatives can help you explore your alternatives and select the ideal solution to fit your business needs and your budget.

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