Wage disputes caused by improper employee classifications are in the spotlight again. This time the Department of Labor (DOL) focus was on the classification of food truck managers as salaried versus hourly employees. Upon review of the allegations, the DOL sided with employees, requiring restaurant chain Clover Food Lab to pay $79,337 in back wages and fines. The company’s owner, Ayr Muir, contends that his business has always done its best to stay “on the up-and-up” and did not intentionally misclassify employees. Despite his strong objection, Muir has no recourse short of a cost-prohibitive lawsuit against the DOL. Here’s his side of the story.
Arbitrary Classifications?
According to Muir, there was no noticeable difference between the company’s food track managers and its salaried restaurant managers. Both were required to complete the same training, had the same responsibilities, and had the same types of interactions with staff and customers. Muir contends that the DOL’s decision to classify one group as salaried and the other as hourly is completely arbitrary.
He goes on to say that at the time the alleged offense occurred, the company was small and didn’t have enough revenues to afford the services of an employment attorney. They acted in good faith on the belief that they were classifying their employees correctly. Unfortunately for Muir, the decision has already been made and the suit was settled.
As an employer, you’re well advised to take this as a learning opportunity and examine your own employment practices.
Tips for Avoiding Similar Allegations
It’s no secret that labor disputes are becoming more common. The DOL has been ramping up its efforts to protect wage-earners, and employees are growing more aware of their right to file complaints. A regular review of your employee classifications and HR policies can help you protect yourself. Here are three of the most important things you can do today.
1. Understand What Your Employees Do
Taking the time to truly understand what your employees do can help you avoid unintentional misclassification. This requires looking beyond the job description and diving into the real-life duties of the position.
Once you’ve done this, make sure the job descriptions you have on file are clear and accurate. The law presumes employees are non-exempt and therefore subject to overtime pay unless proven otherwise. If you deem any positions to be exempt, make sure you clearly document the reason why.
2. Maintain Accurate Records
In addition to payroll files, you should keep additional documentation about your hourly employees including:
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Employee’s name, gender, and contact information
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Days and times that constitute the “work week”
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Daily or hourly wage
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Number of hours worked each day and each week
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Overtime wages paid
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Details regarding any large additions to or deductions from the standard pay
Maintain all of your records for no less than three years. If a claim comes up, you’ll need documentation to prove what you’ve paid and why.
3. Pay Your Wages Correctly
It’s no secret that making payroll on a set schedule can be a challenge. As an employer, you have to deal with cash flow issues, Social Security, payroll taxes, withholdings, and more. However, it’s critical that you pay your employees on time and give them exactly what they’re due.
It’s not okay to push overtime into a later paycheck or average an employee’s hours over a two-week period to avoid overtime pay. Get in the habit of following the rules exactly as they’re laid out and you’re far less likely to run into problems.
The Take-Away
As you can see from the Clover Food Lab case, even unintentional violations of labor laws can result in costly penalties. Not only can a DOL ruling devastate your business financially, it also puts you on the government’s radar for further scrutiny.
When it comes to employee classification questions, the advice of a qualified employment attorney can prove invaluable. When in doubt about an employee’s status, exemptions, or wage rights, always err on the side of caution. In most cases, what’s good for your employees will also be good for your business in the long-run.
