Do you own or manage a small business? If so, you know that there is often only a small margin for unexpected expenses. This means that it is critical to ensure that you protect your business and limit liabilities. After all, a lawsuit against your company could incur significant costs and legal fees, even if you are able to overcome it in court. One liability that small businesses may face are back wages and wage disputes, in the event that an employee claims that they were not properly compensated. Last year the Department of Labor’s Wage and Hour Division collected over $322 million in back wages alone. For this reason, it is important to make sure that you take all necessary precautions to ensure that payment is accurate and timely. Below, we have outlined some tips for avoiding costly wage and hour claims.

• Make Sure Your Employees are Properly Classified. Small businesses often work with many people who are not their employees, such as contractors and independent contractors, to cut down on overhead costs, such as employing people full-time and providing benefits. However, it is critical to make sure that you are not misclassifying employees as independent contractors. Doing so may save you money in the short term, but can expose you to legal liability, civil damages, and fines if it is discovered. This can also cause reputational harm as it causes the appearance of improper business practices. If you are unsure whether your workers should be classified as independent contractors or employees, consult with an attorney to learn the criteria and make sure you classify them correctly. You should also confirm their classification with your tax advisor, as well.
• Keep detailed records. Make sure that you keep detailed records of the time worked by each employee, and retain these records for at least three years. Keeping detailed records of the time that employees worked and the amount and date on which they were paid, as well as having employees approve or sign their time each week, will be useful evidence if they later claim that they worked hours for which they were not paid.
• Use a Payroll Company. A payroll company can help ensure that your payroll is completed properly and according to applicable laws and regulations.
• Make sure wages are paid on time, every time. Cash flow does not always come easy when it comes to running a small business and you may even have understanding employees who are used to inconsistent paychecks, however, there is never an excuse for paying your employees late. Not only is this bad for your reputation as it makes it look like you do not have sufficient funds, but it also opens you up to legal liability and investigations by state and federal agencies. This also means paying wages in a straightforward and transparent way. Some businesses will try to pay all overtime separately from regular wages or will try to trade time off for overtime. Neither of these is legal, and both cases give rise to wage and hour claims.

Contact Coepio Legal Today to Schedule a Consultation

If you have a business and you want to help ensure that your business is protected against liability from potential wage and hour claims, our experienced business attorneys at Coepio Legal can help. Contact us today to schedule a consultation.