JULY 2017 – Examining your wage practices

By Jennifer Brown Shaw Esq. CalChamber

Wage and hour compensation issues remain some of the most active enforcement areas in employment law. These issues represent substantial lost wages for employees and lost tax revenues for government.

Self-audits can serve as a key tool to help employers avoid wage-and-hour liability in the workplace, especially given the current climate of increased enforcement and scrutiny. Employers must ensure their records and practices are compliant, or they face significant legal risk.

Enforcement agencies in California have stepped up efforts to target employers who perpetrate “Wage theft”. Wage theft is a phrase used to refer to infractions of the California Labor C ode involving the payment of wages to workers. Wage theft might refer to employers who fail to pay for all hours worked, fail to pay nonexempt employees overtime, fail to pay minimum wage or fail to properly classify workers as employees and report them to various state and federal agencies.

Failure to comply with state wage-and-hour practices may result in heavy fines, civil or criminal penalties and class-action suits.

In light of increased enforcement and continuing prevalence of class-action lawsuits in California employers should take steps to evaluate their practices and ensure compliance with the law.

Why self-audit? The purpose of a self-audit is to identify procedures and practices that violate the law. Given the complexity of the laws involved, audits invariably reveal some compliance issues. By taking a proactive approach, employers retain control over correcting the issues identified by an audit and are better prepared to defend themselves if the government or a plaintiff’s attorney comes a calling.

A simple review includes employee classification; meal and rest periods; timekeeping and pay practices; calculation of the “regular rate of pay” and related overtime issues; off-the-clock work; pay equality between men and women performing similar work; child labor laws; record keeping and wage statement compliance; and classification of workers as in independent contractors.

Committing your organization to a wage-hour self-audit is a big decision. Performing the audit and implementing self-corrective measures based on the results can be painstaking and expensive. In the long run such efforts can deliver big returns.