Employers face the constant challenge of regulatory requirements, which are constantly changing. To further complicate matters, compliance with employment obligations to employees varies from the employer’s home state to other states where remote employees work. An employer’s compliance failure, regardless of whether it was inadvertent or minor, could provide an employee with an opportunity for an employee to hold an employer liable for statutory violations. Employers must understand the rules for overtime pay, who can be a salaried employee and rules for employee classification, and what happens if wages are not properly paid.
Overtime Pay: An employer must pay an overtime wage of at least one and one-half times the usual hourly wage, computed on the basis of each hour over 40 hours that an employee works during a workweek. Such a calculation must be made for employees who do not have a professional degree or who are not performing administrative or executive functions.
Employee Misclassification: We find that employees often misclassify a worker as an independent contractor, instead of as an employee. While the employer avoids paying unemployment, Social Security, and Medicare contributions, the penalties are substantial if that independent contractor is really an employee.
Wage Payment and Collection: An employer must pay all compensation (wages, bonuses, commissions, benefits, overtime wages) on a regular payroll and must comply with the form and frequency of wage payment, including payment of wages upon termination. For example, upon termination, in some jurisdictions, vacation pay upon termination is due to an employee in full at the next payroll.
Failure to comply with overtime pay, employee misclassification, wage payment, and collection subjects an employer to penalties including back wages, three times the employees’ wages (treble damages), reasonable attorneys’ fees, and costs. What is considered reasonable attorneys’ fees varies from jurisdiction to jurisdiction. Nevertheless, in a recent dispute in the District of Columbia, an attorney with 10-years’ experience was awarded $700 an hour which the court considered reasonable.
We recommend that all employers seek a review of all employment-related classifications and payroll practices. If you have questions related to this or other issues related to employee compliance and employment law, contact Jose Espejo at (301) 251-1180.