Basic Wage and Hour Legal Compliance Issues

Steven Cesare, Ph.D.

A landscaper from California called me the other day to talk about various wage and hour, timekeeping, and compensation issues. While somewhat knowledgeable in these areas, she was slightly overwhelmed with the breadth, depth, and potential financial impact of even a slight legal violation. Responsively, I suggested she conduct a sequential compliance audit process, beginning with the fundamentals, passing through the common, and eventuating at the complex. This serial review allows the landscaper to move in a systematic fashion, adopting a stair-step approach to eliminate, or at least minimize, legal vulnerability.

As I shared with the landscaper, the proposed audit is intended to ensure that minimum legal standards are reflected in her company’s policies and procedures. To reiterate, this is only the first step of several ongoing and increasingly deliberate wage and hour audits that she should undertake. Keep in mind, employers with legally compliant policies and procedures are still subject to claims and litigation.

Despite having satisfactory policies and procedures in place, a compliance gap can often result from inadequate implementation, lack of accountability, or competing business goals that introduce inaccuracy, ineffectiveness, and/or illegality into a company’s wage and hour program. Thus, additional assessment energy must examine the adequacy of how the policies and procedures are actually applied in daily practice to support and assist the company in being able to prove employment law compliance.

Here is a list of very basic questions that should be addressed as part of the initial wage and hour audit focusing on policies and procedures.

Are regular paydays established?
Are employees paid with the frequency required by applicable state law?
Is an authorized instrument of wage payment used?
Are employees provided with a pay stub or earnings statement with each wage payment, which complies with applicable state law?
Per federal and state law, are employees properly classified as exempt or nonexempt?
Are non-exempt employees properly compensated for all overtime worked?
Is off-the-clock work prohibited and prevented?
Are meal and rest period requirements complied with and documented?
Is all compensable “work time” tracked and compensated?
Is vacation accrual, use, and payout tracked and compensated?
Has authorization been obtained for deductions from employee paychecks, and are the deductions appropriate?
When are commissions earned and paid, how are they calculated, and are they included in the regular rate for overtime purposes?
When are bonuses earned and paid, how are they calculated, and are they included in the regular rate for overtime purposes?
Are terminated employees paid their final wages in accordance with applicable state law?