Employers in Massachusetts and around the country are facing a wave of lawsuits and complaints in recent years filed by workers claiming that they were denied overtime pay or challenging their classification as independent contractors. The Department of Labor collects more than $700,000 in back wages every day, and investigations conducted by the agency’s Wage and Hour Division result in workers being awarded an average of $1,120 in back wages or unpaid overtime. Complaints, investigations and lawsuits will likely become even more common in the years ahead as workers become more aware of their rights, but there are steps that employers can take to reduce their chances of being sued.
Comply with wage and hour laws
Employers should keep complete and accurate records that show that employment laws are being complied with and that workers are being paid for the overtime they work. Wage and hour claims are often filed by workers who have been denied overtime because they were classified as exempt by their employers. Any workers classified as exempt from wage and hour laws should have clear and complete job descriptions that describe their responsibilities as well as their duties. The authorities presume that complaining workers are entitled to overtime, so employers that hope to prevail in these disputes must prove otherwise.
Classify employees and contractors properly
Misclassifying employees as independent contractors is a mistake that can cast a long shadow. Employers that lose these lawsuits are ordered to pay payroll taxes and back wages, and they may be scrutinized more closely in the future. The courts focus on the amount of control the parties have when evaluating misclassification claims, and they are likely to rule that companies have employees rather than independent contractors when they control what work is done and how it is done.
Courts study paperwork when they evaluate wage and hour and misclassification claims, so it is crucial for employers to have positions that can be supported by documents. Independent contractor agreements, employment contracts and job descriptions should be checked by professionals familiar with federal, state and local employment laws, and pay records should be organized and complete.