As discussed in our February 10, 2025, article, misclassifying workers can result in claims for unpaid wages and overtime, as well as fines and penalties for employers. Wage and hour claims can be brought by former and current employees, as well as in the form of a class actions, making them expensive to litigate and defend. Aside from properly classifying employees, employers can protect themselves from liability in several ways. Below is a discussion of the practices employers can implement in their workforce to prevent wage and hour claims.
- Conduct Regular Audits
When employers are found liable for unpaid wage and hour claims, they may be required to pay additional damages. For example, employers may have to pay liquidated damages. Under the New York State Department of Labor (NYDOL) and the Fair Labor Standards Act (FLSA), liquidated damages can equal 100% of the total unpaid wages owed to employees.
In addition to liquidated and economic damages, employers may also be subjected to interest for violating wage payment statutes.
Our Firm conducts Employment Practices Audits to identify and correct errors, such as missed overtime payments, underpayments, improper deductions, or misclassification as either independent contractors or exempt employees (who are not eligible to earn overtime). Conducting regular audits can help employers avoid the expensive damages and fees outlined above. When an employee complaint is made, the state or federal Department of Labor (DOL) will likely conduct an audit of the employer’s workplace. This risk is preventable if employers are proactive and perform their own internal audits.
- Avoid “Off-the-Clock” Work
“Off-the-clock” work refers to the job-related tasks which may be occasionally performed outside of a non-exempt employee’s regular work schedule, for which the employee is not compensated. This type of work creates substantial grounds for unpaid wage and overtime claims. Even if the employee’s work is brief, compensation is still necessary. Responding to emails, answering phone calls, coming in to start work early, staying late to finish tasks, and working during meal periods are all considered compensable “off-the-clock” work.
Employers can consider implementing clear policies that prohibit unauthorized work outside of scheduled hours. The policy would contain details of when an employee could work past their schedule and require managers to accurately record all the extra hours worked.
- Maintain Record of all Hours Worked
Whether the employer has many employees on their payroll, only a handful, or small household staff, it is critical that an accurate record is kept of all the employee hours worked. Timekeeping systems can be electronic, such as a digital punch card or time-tracking software.
In unpaid wage and hour cases, the burden starts with the employer to present evidence that the employee did not work the hours they are claiming. When the employer fails to show this in records, the burden shifts in favor of the employee. The Department of Labor in both New York and New Jersey will presume that the employee worked the hours claimed by the employee. Case law in both New York and New Jersey have upheld this notion and accepted an employee’s testimony as a reasonable basis for determining hours worked when the employer is unable to produce time records. It is critical that employers implement accurate recordkeeping systems to rebut this presumption that favors an employee’s recollection of hours worked.
If an employer is audited by the New York Department of Labor, auditors will typically focus on the most recent years available to them, which is usually three years. However, this is subject to the auditor’s discretion.
The New Jersey Department of Labor will generally audit the previous calendar year, unless the auditor discovers issues that could affect other years. This can allow the auditor to expand the lookback period beyond one year. When it pertains to lawsuits, New York and New Jersey will always allow employees to bring back claims that span six years.
Takeaway
Employers can stay ahead of potential wage and hour claims by taking proactive steps like conducting regular internal audits, establishing clear workplace policies, and maintaining accurate timekeeping records. These measures protect the employer’s organization from costly legal disputes but also help create a compliant and well-managed workforce, ensuring operational efficiency and integrity.