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Wage and Hour Laws: How Small Businesses Can Comply

3 Mins read

Small businesses have always been the backbone of the American economy and employ a significant portion of the workforce. However, keeping up with the various wage and hour laws that apply to small businesses can be challenging and time-consuming. Non-compliance with these laws can result in expensive fines and legal action which can be catastrophic to a small business. Here are some ways in which small businesses can comply with wage and hour laws.

1. Understand the Relevant Laws

The first step to compliance with wage and hour laws is understanding the laws and regulations that apply to your business. In the United States, the Fair Labor Standards Act (FLSA) is the primary federal law that regulates wages and hours of work. The FLSA applies to businesses with at least two employees and an annual revenue of $500,000 or more. This is enough to cover more than 143 million workers and 9.8million establishments in the nation. However, your state may have its own wage and hour laws that apply to your business. You should consult with the US Department of Labor’s website to find your states specific rules here:

2. Accurately Classify Employees

Misclassifying employees as independent contractors is a common wage and hour violation. Independent contractors are not entitled to minimum wage or overtime pay, while employees are. Small business owners must understand the difference between employees and independent contractors. If the characteristics of the job resemble that of an employee, they cannot be characterized as independent contractors. Generally, employees work under the control of the employer, while independent contractors work independently and are responsible for their taxes and expenses. 

3. Pay Employees Correctly

Paying employees less than the minimum wage or failing to provide overtime pay is another common wage and hour violation. The federal minimum wage is currently $7.25 per hour, but some states have established a higher minimum wage. Overtime pay is required for non-exempt employees who work more than 40 hours per week, and it is usually one and a half times the employee’s regular hourly rate. On the other hand, salaried employees are typically considered exempt from overtime pay. 

Business owners should also ensure they comply with their state’s payday requirements. Most states have laws that limit pay periods between weekly, bi-weekly, bi-monthly, and monthly intervals. Check with the Department of Labor to see your state’s laws here:

4. Maintain Accurate Records

Small business owners must keep accurate records of employees’ hours worked and pay to comply with wage and hour laws. This includes records of the employee’s name, address, social security number, hours worked each day, and total hours worked each week. Small business owners should also maintain records of any overtime worked and the pay rate for each employee. Maintaining complete records helps businesses stay organized, but is also required by law for both federal and state agencies. It’s recommended to keep records of payroll going back at least 3 years. 

5. Provide Breaks and Meal Periods

Employers must provide breaks and meal periods to their employees in many states. According to the employment lawyers at Walker Law, break periods are one of the most common wage and hour claims. For example, the law in California mandates employers must provide a 30-minute meal period for employees who work more than five hours in a day. Employers must also provide a 10-minute rest period for every four hours worked. Failure to provide these breaks and meal periods can result in costly fines for each violation.

6. Train Managers and Supervisors 

Managers and supervisors play a critical role in ensuring that small businesses comply with wage and hour laws. Therefore, small business owners must train them on these laws and their business’s policies and procedures. Integrating proper usage of lunch breaks, rest periods, and overtime usage into company culture will make compliance a breeze. This can help prevent violations and ensure that employees are treated fairly.

7. Promptly Respond to Complaints

If an employee complains about a wage and hour violation, small business owners must respond promptly and investigate the complaint thoroughly. It’s best to address the issue as soon as it arises to prevent any blows to productivity and morale. Small business owners should also take steps to prevent retaliation against the employee for making the complaint.

Compliance is Key

Compliance with wage and hour laws is essential for small businesses. Non-compliance can result in expensive fines and legal action that can be devastating to a small business. Follow these tips to ensure your business is acting in accordance with the proper laws and protect yourself from costly litigation and penalties.

Austin Poynter is an experienced writer with a focus on safety and legal topics. His expertise includes automotive safety and injury prevention, as well as related legal issues. In his free time, he enjoys being outside, skateboarding, and photography. With a passion for educating and informing readers, Austin is committed to delivering insightful and engaging content that helps promote safety and wellbeing.

Wage and hour stock image by Yuriy K/Shutterstock

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