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Small Businesses Often Violate Federal Employment Laws - How to keep Your Company Out of Court

One of the most complicated aspects of starting and running a business is remaining compliant with the law, especially employment laws. A 2011 survey conducted by the HR Policy Association revealed that approximately 56 percent of employers surveyed had been sued for Fair Labor Standards Act (FLSA) violations, and nearly 27 percent of them had been sued more than once. Below are some tips to keep your small business out of court, although it may also be a good idea to invest in an HR representative or legal counsel that can advise you on the nuances of the employment law.

1. Pre-dispute arbitration program

This is legalese for a contract in which you and your employee agree to resolve disputes in binding arbitration, not in court. The contract should be clearly fair to all parties involved and can be worded to include almost any circumstance. The goal here is to try to mediate any disputes before they become formal arbitrations, and they can even be drafted to include a waiver of class action or other multi-plaintiff suits. 

2. Audits

Regularly review exempt and nonexempt classifications, compensation plans, work hour policies, and overtime policy and calculations. Ensure that you are properly implementing your policies, and that they are compliant with the FLSA to begin with.

3. Proper classifications

The two primary types of employee misclassifications are wrongfully classifying an employee as an independent contractor or intern, and wrongfully classifying a worker as exempt from minimum wage and hour payments. The most common type of incorrect exemptions are so called “white collar” exemptions. This requires exempt administrative, executive, and professional employees to be paid on salary basis.

You may think that this means that the employee gets a set salary every week or biweekly, but there’s more to it than that. Additionally, the exempt employee must earn at least $455 per week and that amount cannot be reduced or withheld based on either quantity or quality of the employee’s work.

4. Compensable hours

The job description might say 9-5, but you still have to take into account all of the hours an employee worked and provide the proper compensation to stay compliant with minimum wage and overtime requirements, which also includes lunch breaks. Although the FSLA doesn’t mandate that lunch breaks are offered, it does state that employees be paid for lunch breaks that are offered unless they run for more than 30 minutes. This means that during those 30 minutes, an employee is completely relieved from all work duties; otherwise, you can’t deduct that time from the employee’s check.

5. Address complaints

Employers get blindsided by lawsuits because they are often ignorant of the complaints and problems leading up to the “sudden” suit. Train your managers and supervisors to pay attention to employee complaints, especially those pertaining to FSLA violations. Also, establish a culture in which employees feel comfortable asking questions and airing grievances, and address their needs immediately.

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