Whether to save money or administrative headaches, many employers make these all-to-common HR mistakes that can cost them big time.
This list was inspired by a white paper produced by the California Chamber of Commerce cataloging the top mistakes Cali-employers make that lead to lawsuits.
For the most part, these HR mistakes are nationwide problems:
- Classifying all employees as exempt. It’s easier to pay someone a salary than figure out overtime and break periods. And some employers think simply making all employees salaried makes them exempt. It doesn’t. To be exempt, employees must: A) be paid at least $455 per week, B) be paid on a salary basis, and C) perform exempt job duties (note: There are three categories of exempt job duties — executive, administrative and professional).
- Failing to pay employees for taking short breaks. The feds do not require employers to give workers meal or rest breaks (though some states do). But if you offer short breaks (from five to 20 minutes long) you’ve got to compensate employees for this time.
- Making everyone an independent contractor. It’s tempting for many employers not to have to offer things regular employees are entitled to like workers’ comp, unemployment insurance, disability insurance and family leave benefits. But not everyone qualifies as an independent contractor. The primary determining factor as to whether a worker can be classified as an independent contract usually boils down to control. Who determines how his/her work is done? Who supplies the tools/equipment? If it’s the company, the person is likely an employee. (Note: The IRS recently issued a document offering tips to businesses on classifying workers).
- Not providing harassment and discrimination training to managers. Some companies assume their managers/supervisors don’t need the training, and it’s a mistake they often pay for.
- Firing workers for taking a leave of absence. Again, some companies think it’s easier not to have to deal with the administrative headache. But employees on certain types of leave are protected by federal law, like disability leave, family medical leave, military leave and jury duty.
- Withholding an employee’s final check. Federal law doesn’t say you have to issue an employee’s final check upon termination, but some state laws do. Also, the FLSA generally doesn’t allow employers to deduct the cost of things like unreturned equipment and uniforms from an employee’s final check.
- Providing loans to employees and deducting loan payments from their paychecks. Most states only permit paycheck deductions for things like taxes, retirement and benefit plans.
- Using overly strict noncompete agreements to prevent employees from working for the competition. Your noncompete agreement will be shot down in court if it’s found to be so strict that it actually prevents ex-employees from making a living.
- Failing to pay employees for accrued vacation time. In many cases, courts have ruled earned vacation time is a vested benefit that must be paid out upon termination. But if you want to limit what employees can collect? Place a cap on the accrual of vacation time.