Avoid Labor Law Violations

Labor law regulates how much you must pay an employee and what other actions you must take with respect to pay. In order to avoid violating labor laws, you should hire an attorney. If you fail to observe the labor laws, then you can be sued or fined. In 2013, federal wage and hour lawsuits reached a record high, with over 7,500 cases filed.

Steps

Hiring Only Legal Workers

1. Retain your I-9 forms. An I-9 form documents that an employee is authorized to work in the U.S. Both citizens and non-citizens must complete and present you with an I-9. You must hold onto these forms for three years after the date the person is hired or for one year after employment ends (whichever is later).
   • You can scan and store these electronically, but you must hold onto them.
2. Do not discriminate against immigrants. Although it is illegal to hire undocumented immigrants, you also cannot discriminate against immigrants who are in the country legally. You should document thoroughly the reasons why you hired or did not hire someone.
3. Require proof of the employee’s age. You also need to avoid hiring minors illegally. Minors have complicated laws which restrict their ability to work. The U.S. federal government limits those under 16 to working a maximum of three hours a day during the school week and a maximum of 18 hours for the school week.
   • The federal government also prohibits work from 7:00 pm to 7:00 am. During the summer (June 1 to Labor Day), the prohibition starts at 9:00 pm.
   • State laws may be different. You should contact your state’s Department of Labor to find out the rules governing when minors can work and how much work they can perform.
   • Always be sure to check that the minor has provided you with proper identification which shows their birthdate, such as a valid driver’s license. Make a photocopy of the license to keep for your records.

Classifying Employees Properly

1. Identify independent contractors. You need to make sure that people you classify as independent contractors are not actual employees. Employees are entitled to benefits such as unemployment compensation and overtime pay, which are unavailable to independent contractors. There is no simple way to determine if someone is an independent contractor or an employee. However, the Department of Labor looks at the following factors:
   • How permanent the work relationship is. The more permanent, the more likely the worker is an employee, not an independent contractor.
   • How integral the worker’s contribution is to the employer’s business. If the worker’s product is sold directly to consumers, then the worker is more likely an employee.
   • The degree of control exercised by the employer, such as hours worked and when those hours are worked. The greater the degree of control an employer exercises, the greater the likelihood that the worker is an employee.
   • Whether the person can work for other people. If so, this factor points toward the worker being an independent contractor.
   • The level of skill required to perform the job. If the worker performs routine tasks, then he or she is more likely to be an employee.
   • Whether the worker has his or her own business, which they advertise to the general public. When this happens, the worker is probably an independent contractor.
   • Whether the worker is reimbursed for the purchase of supplies, materials, or tools. Independent contractors are generally not reimbursed.
2. Classify “managers" properly. In order to avoid paying an employee overtime, you need to check whether the employee qualifies as a “manager". Examples of managers include executives, administrators, and professionals (e.g., lawyers or doctors). To qualify, the salaried employee must meet the following criteria:
   • the employee must be paid at least $455 per week
   • the salary cannot be reduced based on the quality or quantity of the employee’s work
   • the employee performs work typical of a managerial or supervisory role
3. Identify unionized workers. If you are hiring individuals that are represented by a labor union, you will have to pay special attention to labor laws. If employees choose a labor union to represent them, you, as the employer, will be required to negotiate in good faith about wages, vacation time, insurance, and other job related subjects. If you hire union employees, you cannot threaten to fire people if they join the union, threaten to close your place of business if people join the union, promise benefits to those that do not join the union, or punish employees in any way for being a part of the union.
4. Determine whether you employ "wait staff". Wait staff are employees who customarily receive more than $30 per month in tips. If you hire a wait staff, you may be able to take a tip credit, which will allow you to pay the employee a certain amount below the minimum wage.
5. Identify your outside sales force. If you hire outside sales employees, you may be able to avoid certain provisions of the Fair Labor Standards Act (FLSA). If an employee qualifies, you may not have to pay them a normal minimum wage or overtime. To qualify as an outside sales employee, the person you hire must be making sales and must be doing most of their work away from your place of business.
6. Determine whether you will employ H1-B staff. H1-B employees are non-immigrant aliens with a specific visa that allows them to work certain jobs within the United States. An H1-B employee must work in a field that requires highly specialized knowledge and the attainment of at least a bachelor's degree. Examples of H1-B jobs include engineers, architects, biologists, or economists.
   • If you are employing H1-B workers, you must attest to the U.S. Department of Labor that you will pay wages to these workers in an amount that is equal to the amount you pay other workers doing the job, or the prevailing wage for the job in your area, whichever is greater.
7. Check whether the “intern” is really an employee. An intern is someone who volunteers at an organization in order to learn skills. You do not have to pay the intern if he or she qualifies as an intern under the law. In the U.S., someone is an intern if:
   • the internship is similar to training which would be received in an educational environment
   • the purpose of the internship is to benefit the intern
   • the intern does not replace regular employees but, instead, works with existing staff
   • the intern is not necessarily entitled to a job upon the internship’s completion
   • your company derives no immediate advantage from the intern’s activities and may, in fact, suffer on occasion from using the intern
   • both you and the intern understand that the intern is not entitled to wages

Paying Accurate Wages

1. Count all hours. You can’t short-change a worker for time spent on the job. You must properly compensate for waiting time as well, so long as the waiting time is for the benefit of you (the employer).
   • Also work performed on the employee’s initiative is also work that must be compensated. For example, if an employee decides to stay late to finish a task, then you must compensate the time worked. If you do not want to pay extra, then you must tell the employee to stop working and go home.
   • There may be gray areas when considering what counts as time worked. For example, time spent putting on clothing for a job (such as a uniform) may or may not count as time worked. You should consult your lawyer if you have questions.
2. Pay attention to meal breaks. An employee must be paid for any meal break unless it is a “bonafide” meal period. A bonafide meal period is at least 30 minutes long.
   • The employee must be completely relieved of work during this period. Having an employee sit by the phone during a slow day is not a bonafide meal period, since you are expecting the employee to answer the phone during the meal break.
3. Keep track of hours. You have options as to how you keep track of employee time. You can use a time clock or instead tell workers to record their time. You must record the time work started, the time it ended, and any meal break or personal break longer than 20 minutes. Whichever system you use, it must be accurate and comprehensive.
   • If an employee voluntarily comes into work early or leaves work late, then you do not have to compensate for this time if no work is performed.
   • You must also keep records for at least four years.
4. Pay at least the minimum wage. The current federal minimum wage in the United States is $7.25 an hour. States may set their own minimum wages, which can be higher than the federal minimum. In California, for example, the minimum wage in 2016 will be $10.00 an hour. You need to check to make sure that you are paying at least your state’s minimum.
   • Contact your state’s Department of Labor to check to see that you are paying at least the state’s minimum wage.
   • As with almost all labor laws, there are exceptions to minimum wage laws. For example, workers under 20 years of age may be paid a minimum of $4.25 an hour provided that they did not displace other workers. This minimum applies only for the first 90 consecutive calendar days of employment.
   • Visit the Department of Labor’s website for other exceptions. If you think you have employees who fit into an exception, then you should get legal advice to make sure that you are following the law.
5. Calculate overtime pay accurately. Generally, you must pay an employee 1.5 times their regular rate of pay for any hours worked in excess of 40. Your state law also may require overtime pay in other situations. For example, in Alaska, you must pay time and a half for any hours worked in excess of eight during a single day.
   • For more information, see Calculate Overtime Pay.
6. Pay a final paycheck promptly. You must pay a final paycheck within a certain amount of time. In many states, you have to pay it quickly. For example, in Connecticut, you must give the employee a paycheck on the next business day (if the employee was fired) or on the next scheduled payday (if the employee quits). In New Mexico, the final check must be given within five days (if the employee was fired) or on the next scheduled payday (if the employee quits).
   • You should check your applicable labor laws to see what the requirements are. If you violate them, you could be sued and end up having to pay for the employee’s attorneys’ fees.

Streamlining the Complaints Process

1. Use a pre-dispute arbitration clause. One way to streamline the dispute process is to include an arbitration clause in an employment contract. With the clause, both you and the employee agree to settle disputes outside of court, using arbitration. A properly drafted arbitration clause could require that the parties participate in mediation before arbitration.
   • You should talk to your lawyer about how to draft a valid arbitration clause. An arbitration clause is a great resource because arbitration can be much faster than a lawsuit. Arbitration is also private.
2. Train supervisors properly. You can pre-empt a lawsuit by training supervisors in your organization to pay attention to complaints about labor law violations and respond appropriately. The supervisor can then notify management of the possible violation so that you can address the violation quickly.
3. Create manuals and employee handbooks. You should publish handbooks or manuals and give them to employees. The manuals should lay out the company’s grievance process. Tell the employees who they should contact and explain the steps for grievance. For example, you might want them to immediately contact an immediate supervisor. You should create a sample grievance form for the employees to fill out and include it in the manual.
   • With respect to compensation, you should clearly state that you will make required deductions for state and federal taxes as well as voluntary deductions (for benefits). Also clearly explain your company’s policies with respect to work schedules, overtime, breaks, and time keeping.
   • An adequate manual should discuss other issues besides compensation (e.g., antidiscrimination policies). See the Small Business Administration’s website for what information you should include in the manual. Make sure to review your manuals at least once a year and make sure that they are up to date with current law.
4. Keep a lawyer on retainer. There are many wrinkles to labor law. In order to receive the most accurate advice possible, you should start a relationship with an attorney who you can call up and ask questions. By paying a “retainer,” you can make sure that the lawyer is always available to answer your questions. A retainer is a small fee you pay regularly to the attorney in order to secure his or her services.
   • Get referrals. Ask other business owners if they would recommend their lawyer for labor law issues. You can then call up the attorney and ask if they are taking on any new clients.
   • You may also want to contact your state’s bar association for a referral for a business or labor law attorney.
   • Talk with the lawyer about questions you have. A lawyer can help you avoid violating labor laws by making sure you have properly classified employees and have paid them for all the work that they have performed. If you are ever sued, the attorney can help defend you as well.

References

See also

• Sue the Government for Discrimination
• Claim Age Discrimination for Apprenticeship Programs
• Help Avoid Employee Lawsuits
• Verify Rehab Treatment for an Employee
• Handle Disciplinary Actions
• Claim Weight Discrimination
• Know if You Should Sign a Covenant Not to Sue
• Defend Yourself in a Wrongful Termination Lawsuit
• File Charges With EEOC
• Defend Yourself in an Asbestos Exposure Lawsuit

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