How To Guard Against Wage Theft Lawsuits

scales-295109_640Observers used the words “game changing” and “broad ramifications” when the Ninth Circuit Court of Appeals recently issued its ruling in a case that pitted the delivery giant FedEx against some 2,300 drivers on the West Coast.

The case centered around FedEx’s classifying the drivers as independent contractors rather than company employees. The appeals court sided with the drivers because FedEx maintained controls over the drivers’ appearance, vehicles, hours and conduct just as a business would over regular employees.

Increased litigation

The case is an example of “wage theft lawsuits,” which have certainly been on the rise in recent years. In the FedEx case, by classifying drivers as independent contractors, the delivery company was able to duck overtime pay and other benefits that would have been given to a regular employee.

Abusing the “independent contractor” classification is probably a fairly common occurrence. Don’t fall into that trap. It can be a costly mistake. Among the typical attributes of a true independent contractor are:

  • Sets his or her own hours and schedule,
  • Usually works for more than one company,
  • Works independently,
  • Works from his or her own office or home, and
  • Pays the costs of getting the job (contract) completed.

If you have “independent contractors” who don’t sound like the people I’ve described in those five bullet points, you need to get legal advice and see if you should bring them onboard as employees or readjust your relationship to them.

Other areas to watch

There are other ways you can find yourself on the wrong side of a wage theft lawsuit. First, make sure you understand federal and state laws regarding overtime. If you’re allowing – or scheduling – employees to work hours that push them into overtime pay situations, be certain you are compensating them properly.

Also, be a stickler about time cards. You don’t allow other employees to punch coworkers in and out, don’t allow management to change time cards to skirt overtime regulations. Also, never ask an employee to sign a blank timecard.

In the same way, know the law regarding breaks – both rest breaks and meal breaks – and adhere to it. Wal-Mart was fined $187 million because it was found to have cut rest and meal breaks.

Sometimes in the small business environment, owners, managers and line-level employees develop close relationships that almost resemble friendships. Friends will ask “favors” of friends and in the workplace that may translate to stretching some labor laws.

Don’t allow yourself or your managers to fall into that trap. It can come back to hurt you in a major way. Not only can it cost you money, it can tarnish your reputation in your community.

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