Labor represents a significant expense for many businesses. Keeping labor costs under control is essential. At the same time, businesses must follow all local and federal wage and hour laws. Many of these laws have recently changed, and missteps can lead to expensive lawsuits.
Wondering if your company is at risk? Take a moment to review a quick recap of the laws below.
- Minimum Hourly Wage: The current federal minimum wage is $7.25 per hour. However, many states have higher minimum wages, and some states are implementing significant increases. Many of these increases went into effect on January 1. In New York, the minimum wage is adjusted annually until it reaches $15.00 per hour. New York’s minimum wage law is particularly complicated because requirements are different based on the size and location of the employer. See details here.
- Minimum Salary: Although salaried employees are often expected to work more than 40 hours per week, employers must still pay attention to overtime laws. Employers do not have to track hours or provide overtime for exempt salaried workers. However, not all workers qualify for exempt status. Only some positions, such as those that are executive, professional or administrative in nature, qualify for exempt status.
Additionally, exempt workers must be paid a minimum salary, just as non-exempt workers must be paid a minimum hourly wage. The minimum salary increased effective January 1, 2020 and is now $684 per week. This is a significant increase from the previous minimum salary of $455 per week, and the U.S. Department of Labor predicts that 1.3 million workers will be impacted.
- Independent Contractor Classification: Independent contractors are not covered by the wage and hour protections provided by Fair Labor Standards Act. However, the U.S. Department of Labor makes it clear that workers should not be considered independent contractors unless certain criteria are met, and that many employees are currently misclassified.
States may have even stricter rules for worker classification. In California, for example, AB 5 went into effect on January 1. Known as the “gig work” law, AB 5 establishes strict rules for when a worker can be considered an independent contractor. Other states are expected to adopt similar laws.
- How Hours are Tracked: Employers must track hours for non-exempt workers and provide overtime when required. Some states their own overtime rules, as well. Disputes often arise over how hours are tracked. In some cases, these disputes may involve workers who are misclassified as exempt salaried workers or as independent contractors. Other disputes may involve time that is not recorded, such as prep time or waiting time.
Below are just a few examples of the violations recently announced by the U.S. Department of Labor:
- A Florida-based roofing contractor has to pay $60,098 in wages and damages. The company allegedly paid workers a piece-rate wage without recording the hours worked or paying overtime.
- A company based in South Carolina was ordered to pay $66,410 in back wages and damages for wage violations. The company allegedly paid some managers a flat salary that did not provide minimum wage when divided by the number of hours worked.
- A horse-training facility in California has to pay $33,034 for overtime violations. The company allegedly incorrectly classified horse groomers as independent contractors and failed to pay overtime.
- A Florida-based restoration company had to pay $201,508 in back wages to 141 employees for violating overtime pay requirements.
As you can see, employment practices violations can be costly.
To help you protect against employment practices exposures, we recommend that businesses consider employment practices liability insurance (ELPI). However, it’s important to note that many EPLI policies have exclusions for wage and hour violations. Contact your BNC Insurance agent to learn more.