As an employer in the United States, the most litigious society worldwide, wage and hour claims are a key area of concern. In fiscal year 2024 alone, the Wage and Hour Division of the U.S. Department of Labor recovered more than $273 million in back wages and damages from employers on behalf of almost 152,00 employees nationwide.
To avoid potential claims issues, there are several insulate your organization from risk:
- Classify Employees Accurately – Exempt vs. Non-Exempt Employee Classification
Using salary basis, the salary level test, and an employee’s job duties and responsibilities as a guide, you can ensure that each employee is categorized as exempt or non-exempt. This is used to inform your duties to them as an employer – specifically regarding minimum wage and overtime pay protections. - Pay Employees Properly
The biggest concern in this area is ensuring that Non-Exempt employees are paid at least the federal or state-mandated minimum wage (whichever is higher) and 1.5 times their regular rate for any hours worked more than the 40-hour work week. - Institute Workplace Policies
- Establish clear working hours – This should include a definition of standard work week hours and how to request changes in hours or overtime hours.
- Highlight time tracking expectations – For those employees who must track their hours, ensure they have access to a manual log or online tool for hours input.
- Define break times – Set clear guidelines on paid and unpaid breaks, as well as how those should be entered in the above-mentioned time tracking log.
- Conduct Regular Training
It is important to ensure that all managers and employees are kept informed regarding wage & hour expectations and policies. Therefore, training should at the minimum be conducted at the time of hiring and annually thereafter. - Keep Detailed Records
To best defend your organization against any claims, it is critical that you keep detailed records of each employee’s wage and hour details.- Track employee hours worked and maintain up-to-date employee records, including hourly rates, overtime pay, bonuses, etc.
- Give employees access to time records to aid in identifying errors before they become a claims issue.
- Retain records for the required period – Payroll records should be kept for at least three years, and wage computation records should be kept for at least two years.
- Regularly audit your records.
- Address Employee Complaints Promptly
No matter how many precautions you take as an organization, you may still face wage and hour complaints. To avoid the complaint turning into legal action, it is paramount that you take all complaints seriously and look to resolve them as quickly as possible.
Sublimited Wage and Hour coverage can be added by endorsement to most stand-alone Employment Practices Liability (EPLI) policies for minimal additional premium. If you do not have Employment Practices Liability currently in place, there is no time like the present to explore options. There are numerous carriers who specialize in EPLI coverage and include access to HR Hotlines and information repositories upon binding.
If you have any questions regarding your organization’s Employment Practices Liability coverage, including the underlying Wage and Hour Claims sub-limit, please contact Sentinel today.
