Take steps to avoid wage and hour lawsuits

stop watches

Businesses place themselves at risk for lawsuits when they categorize or pay employees incorrectly. Even if you make these violations in error rather than purposefully, your company could receive significant fines.

These strategies can help North Carolina businesses protect themselves from wage and hour-related lawsuits.

Understand exempt vs. non-exempt employees

Under state and federal law, most employees are nonexempt and thus eligible for overtime pay. A company can only classify an employee as exempt if he or she receives an annual salary of at least $23,660 and performs highly specialized professional duties, such as accounting or human resources management. In addition, you cannot classify employees as independent contractors if they must work on-site and under direct supervision. Incorrect classification is the basis of many lawsuits.

Know when to pay time-and-a-half

Hourly nonexempt employees who fall under federal minimum wage laws also qualify for overtime pay under federal law. Employers must pay these workers 150% of their hourly pay rate when they work more than 40 hours in a given week. For example, if an employee makes $20 an hour, he or she must earn $30 an hour for overtime.

Keep meticulous records

Track employee hours worked, earnings, overtime pay and other important information carefully. Save these detailed payroll records for at least three years. If a current or former employee does attempt to sue for a wage or hour claim, you will need this information for legal defense. Consider using a time clock or other electronic time-keeping method to ensure accuracy.

Pay wages on time

Companies must pay hourly employees for all the hours worked within the designated pay period. Do not hold back hourly wages or overtime pay until the next pay period. Payroll taxes must also be up to date to avoid federal sanctions. Employees may not receive comp time off in lieu of overtime pay or other wages.

Understanding federal and state labor laws is essential for any business that hires employees. Review these guidelines regularly to lower your chances of a costly court case.