Avoiding Wage & Hour Lawsuits: Four Steps Every Employer Should Take

In light of the continued onslaught of wage and hour claims made by current and former employees, including putative class and collective actions, there are a number of steps employers can take to help mitigate potential lawsuits.

1. Institute Timekeeping and Payroll Policies

First, employers can implement a number of policies and procedures focusing on timekeeping and payroll processing that are designed to protect them from potential wage and hour claims. Policies prohibiting unauthorized “off-the-clock” work, requiring authorization to work overtime, and obligating employees to accurately record time worked can help insulate employers. Likewise, policies that require employees to edit timekeeping records to accurately reflect hours worked, coupled with open door policies encouraging employees to report pay inaccuracies and appeal pay review decisions, allow employers to defend belated claims that employees worked unpaid time. And as unsavory as it may seem, employers must discipline supervisors and employees for failing to comply with their lawful policies and procedures.

2. Train Employees and Supervisors

Maintaining policies is generally not enough. Training employees and supervisors regarding compliance policies and procedures is imperative. For non-management employees, the training should begin with employee orientation. And for all employees, whether managers or non-managers, the training should be periodically renewed.

3. Adopt Arbitration Agreements

Employers may also want to consider adopting mandatory arbitration agreements requiring employees to pursue claims through alternative dispute resolution and to forego pursuit of class and collective action claims. These agreements may limit employers’ wage and hour liability. Likewise, they may help keep wage and hour disputes private. However, employers should be aware that these agreements are not always deemed enforceable. Moreover, the costs of funding and defending numerous arbitrations can exceed the costs of defending one or two class and collective actions.

4. Perform Wage and Hour Audits

Performing comprehensive wage and audits can limit, or eliminate, exposure to wage and hour liability. These audits can span employee classification issues, i.e., discerning if employees are properly classified as exempt from the minimum wage and overtime requirements. Additionally, employers should consider “off-the-clock” vulnerability reviews to determine if their operating policies and procedures create risk exposure. Finally, employers should audit their compliance with record-keeping, payment upon termination, and other hyper-technical wage payment requirements.