Wage & Hour Compliance: 4 Common Pitfalls

November 8, 2017 - minute read

Wages.jpgAs many HR professionals already know – it can become easy to lose track of state compliance laws that go beyond federal standards. Companies can fall into major problems if they fail to pay their employees for all compensable work time.

Within the last two years, wage and hour class action settlement values have tripled. This makes it crucial to ensure that your company is compliant with these laws – especially if your company operates in multiple states.

Most states mirror the federal standard when it comes to wage and hour laws. However, some states, such as California, have intricate details and standards within their specific laws. With every state having different requirements, it is important to keep up to date and become familiar with the law in the states your company operates in.

Before we discuss the difficulties of wage compliance, we need to dive into what exactly wage and hour compliance is and the specific wage compliance laws that affect your state:

What is Wage & Hour Compliance?

Wage and hour compliance is the act of being compliant with federal and state-designated wage and hour laws that protect employees. These laws regulate the hourly rates and wages that must be paid to employees. They are put in place to create a fair working environment for employees.

The most common wage and hour laws are minimum wage laws and overtime laws.

Minimum Wage Compliance

Minimum wage laws differ from state to state and regulate the minimum wage an employee must be paid hourly.

Overtime Compliance

Overtime laws set a standard for how an employee must be compensated when working over the standard 40 hour work week.

Other Wage & Hourly Compliance Laws

Other common wage and hour compliance laws include meal and break laws, jury duty leave, sick leave, vacation leave, and more.

Wage & Hour Compliance Laws that Companies Need to Know

The Fair Labor Standards Act was signed into law by President Franklin D. Roosevelt. The FLSA was a broad legislation that affects all companies with two or more employees as long as they take part in interstate commerce. It did not address working conditions, companies that do not take part in interstate commerce, minimum wages, and more.

Therefore, states have separate wage compliance laws that protect employees’ rights.

FLSA Standards

The FLSA sets a variety of regulations for nationwide wage and hour compliance. A few significant laws are:

  • Minimum wage - depends on the job and company
  • Overtime - companies must pay time and a half for all hours worked over the standard 40 hour week
  • Definition of employer-employee relationship - employers cannot escape FLSA regulations by designating full-time employees as independent contractors
  • Record-Keeping - companies must prove record of compliance

State Wage & Hours Compliance

Since these laws are rather broad, the states have taken it upon themselves to enact state-regulated wage and hour laws. State laws will generally feature:

  • Employee favorable overtime laws
  • Increased minimum wage
  • Regulations of the form/frequency of payment

To ensure compliance, a company must align their practices with all state and federal wage hour compliance regulations. For minimum wage compliance in your state and more, check with the Department of Labor.

4 Pitfalls of State & Federal Wage & Hour Compliance

The abundance of state and federal laws to keep track of can create a high risk of error. We’ve outlined the four most common wage and hour compliance pitfalls and how to avoid them.

1. Not Paying Employees for All “Compensable Time”

One major rule of thumb — if you know an employee is working, you must pay them for it. It is important to remember that even voluntary work is compensable.

An efficient way to keep track of all your employees compensable time is through a biometric time clock.

These clocks can accurately keep track of the amount of times an employee clocks in and out through fingerprint or facial recognition. Implementing a biometric clock can improve workforce productivity and, more importantly, guard against compensation and fraud claims that revolve around lack of pay.

2. Not Providing Pay Stubs When Required

While federal law requires employers keep accurate records of hours worked and wages paid, there is no federal law requiring employers to provide employees with pay stubs – but that isn’t the case on the state level.

Having a strong time and attendance system in place can eliminate the extra worry of dealing with pay stubs. A strong system should include employee self-service capabilities, which can provide the ability to view timesheets and print pay stubs right from the time clock. This can slash printing and distribution costs in half and eliminate the worry of forgetting to provide pay stubs to your employees.

Digital Guide: Wage and Hour Pitfalls

3. Not Providing Meals and Rest Breaks as Required

One of the most overlooked wage and hour compliance pitfalls revolves around meal and rest breaks. While federal laws do not require meal breaks, it does require that employers who offer meal breaks of less than 30 minutes pay for that break time. However, the federal law does not require rest breaks, it does require that employers who offer rest breaks of less than 20 minutes pay for that break time.

A robust time clock should have the capability to give a meal break reminder to prevent employees from skipping a required meal break. When this feature is enabled, any employee who did not take a meal break the previous day will receive a notification upon clock-in to take their meal break. This feature also prevents employees from clocking back in from their meal break before the allotted time has passed.

4. Assuming Work is “Off the Clock” … When It’s Not

Many problems can arise when it comes to employers assuming work is “off the clock.” Pre-shift and post-shift work is compensable if it involves the employee performing his/her “principal activity.” These can include pre-shift meetings, work during meal periods, taking work home, and after-hour calls.

You can eliminate the guesswork when it comes to assuming work is on or off the clock by incorporating a strong time collection method. With a new method, you can say goodbye to time rounding, buddy punching, and manual errors. Some of these options can include biometric time clocks, mobile time tracking with GPS, telephone time tracking (IVR) and online time tracking, which can be mixed and matched per the needs of your business.

EPAY Systems’ Human Capital Management Solution

EPAY includes an advanced time and labor management solution that makes it easy to track employee work time precisely, even tricky areas like overtime and meal breaks. Plus, it's unified with our robust payroll engine, ensuring employees are paid correctly for their work time.

Want help avoiding wage and hour pitfalls? Learn more about how EPAY Systems’ time and attendance system can keep accurate track of your employees – request a demo today.

If you want to avoid fees, fines, and courtrooms, download the digital guide to learn 10 wage and hour pitfalls, so you can take steps to steer clear.


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Filed Under: Compliance Human Capital Management