— by Colleen McCarthy
Wage and hour lawsuits are a growing problem for California employers. The most common wage and hour claims in California are for unpaid overtime, missed meal and rest periods, off-the-clock work, and misclassification as exempt employees or independent contractors. Employers must be proactive to prevent exposure to such litigation and its related costs.
- Classify Independent Contractors and Exempt Employees Correctly.
California law limits an employer’s ability to classify a worker as an independent contractor or exempt employee. Some red flags when classifying an independent contractor include: (i) you are controlling the work, (ii) you previously employed the worker as an employee, (iii) the worker is at your office using your equipment and your company’s email address and business cards, and (iv) the worker performs the same type of work that your company provides. Some red flags when classifying an exempt employee include: (i) the employee doesn’t earn at least two times the minimum wage and thus doesn’t meet the salary basis test (currently $41,600/year), and (ii) you are making deductions from the employee’s wages.
- Know the Law and Audit Time Records Regularly.
One of the best practices to prevent a wage and hour claim is to educate yourself about wage and hour laws and be vigilant about auditing time records. Are your non-exempt employees receiving a full 30 minutes for meals? Are they starting meals before the end of the fifth hour of work (i.e. by 12:59 p.m. for an 8:00 a.m. start time)? Good timekeeping practices and follow-up with employees who don’t adhere to your policies goes a long way. Train your supervisors, document workday and meal break start and end times, and then … audit … audit … audit.
- Have a large number of non-exempt employees? Consider an Arbitration Agreement.
Besides having compliant time records and wage statements, an enforceable arbitration agreement with an express class action waiver may be your best friend if you are hit with a class action wage and hour claim. An arbitration agreement containing a class action waiver foregoing the employee’s right to participate in a class action significantly reduces a company’s exposure.
So much can be done to combat these devastating wage and hour claims. When employers make it a priority to learn the law, they can ensure compliance. Prevention is key.
Colleen McCarthy, Esq. is a Partner and the Employment Law Practice Group Leader at Ferruzzo & Ferruzzo, LLP. She is dedicated to representing and protecting employers with a particular emphasis on risk mitigation through preventative counseling and sound practical advice. Her objective is to educate employers about the complicated employment laws that impact their businesses to ensure that they are in compliance and to reduce the chance of costly litigation.