This is the time of year when employees may be called upon to work extra hours. This may be well received by employees who appreciate the extra compensation to pay for holiday gifts and living expenses. But when a paycheck is received and not understood, employee discontent can lead to an employer headache. Let’s get the season started by avoiding common payroll problems.
Employers should be mindful of wage and hour compliance requirements. There are few things worse than a Department of Labor (DOL) investigator showing up in the workplace during peak season asking for a review of your wage and hour records in connection with an employee’s complaint.
Effective October 1, 2015, Connecticut enacted a new law concerning an employee being paid less than the minimum wage or overtime wages to which she or he is entitled. It provides that the employee may recover twice the full amount of the wages (minus the sum already paid by the employer) plus costs and reasonable attorney’s fees, which are determined by the court.
This legislation overrides well-established Connecticut Supreme Court precedent that provided double damages and attorney’s fees only upon a trial court’s finding of bad faith, arbitrariness or unreasonableness. Now, an employer may only avoid double damages, attorney’s fees and costs by proving it had a good faith belief that the wages paid were in compliance with the law. As the new law does not define what will satisfy the “good faith” standard, it is reasonable to expect that Connecticut courts will likely follow the good faith exception that applies to federal law under the Fair Labor Standards Act. And courts regularly award double damages under that statute.
Why the change? The public policy is clear. If you work, you must be paid. Just as employers are expected to know the tax laws, they are expected to know the laws governing the payment of wages. The DOL recognizes that some payroll mistakes are inadvertent, but others are purposefully designed to cheat employees. While employers may be pressured to cut costs, earned wages must not be on that list.
Overtime is one common payroll concept that causes unrest this time of year as employees may believe that they are not being paid overtime rates when they are due. To clarify, employers are required to pay nonexempt employees time and one-half their regular rates for any hours worked in excess of 40 hours during any workweek. “Hours worked” is defined as all time during which an employee is required or permitted to perform work for the benefit of the employer. In addition, it includes all time during which an employee is required to be on the employer’s premises, or to be on duty. Meal periods may be credited as nonworking time provided that: the beginning and end of the meal period are recorded, the employee is entirely free from all work requirements during that period and the employee is free to leave the establishment.
A common misconception is that employers must pay overtime premium rates for hours other than those worked in excess of 40 hours per week, for example, hours worked in excess of eight-hour workdays, or on weekends, holidays or other days of rest. There are no such requirements in Connecticut, Massachusetts, New York or federal wage and hour laws. Further, when vacation or holiday pay is included in a paycheck, those hours do not count toward the 40 hours beyond which overtime rates kick in. Again, overtime only is required after 40 hours worked in a workweek.
When these laws are unclear to employees, they sometimes will not ask their employer for fear of retaliation. Instead, they may ask the DOL, which can prompt an investigation or an audit. A simple reminder to employees as to the overtime rules may be worth the extra print on the pay stubs.
As an employer’s representative, if you have any questions about the wage payment laws, seek counsel promptly—before a problem arises.
Glenn A. Duhl is a management-side employment and litigation lawyer at Siegel, O’Connor, O’Donnell & Beck, P.C. Please visit www.siegeloconnor.com for more information.
The information contained in this article is general in nature and offered for informational purposes only. It is not offered and should not be construed as legal advice.
(image courtesy of wisbar.org)