As a business owner, you have a duty to pay your employees overtime when they work more than 40 hours in one workweek. You must adhere to the Fair Labor Standards Act and all relevant regulations by the United States Department of Labor.
If you violate overtime rules, your workers may sue you. Here are three tips for avoiding an overtime lawsuit as an employer:
1. Be clear about duties
If you wrongfully classify employees as exempt, you may unlawfully deny them overtime pay. To properly designate your workers as employees or independent contractors, you must have a clear understanding of their daily responsibilities. Make sure the job description is accurate and that you classify each worker appropriately. If you have any exempt employees, double-check that you have the necessary evidence to back up that classification.
2. Keep detailed records
Strong documentation will come in handy if you ever face accusations of failing to pay overtime. Keep the following records for the past three years for your hourly employees:
- Hourly rate
- Weekly hours
- Hourly or daily earnings
- Overtime pay
- Deductions from or additions to pay
If you do not maintain these records, your employees will be able to sue for more back pay, and you will have more trouble addressing these issues.
3. Pay due wages immediately
Avoid these common overtime mistakes:
- Holding back overtime pay and promising to make it up on the next payment
- Paying contractors but not employees
- Delaying payroll taxes
- Paying partial overtime
- Averaging employee hours over two-week periods
The more you skimp on and delay payments, the more likely your workers are to sue you. It is better to be as prompt and accurate as possible.
You must be in strict compliance with wage and hour laws as an employer. To reduce your risk of violating overtime laws, make sure you adhere to the above guidelines.