The Five Most Common Wage Mistakes Made by Employers

From what we've observed within the last five years:

Not Paying an Employee's Final Wages on Time.

In most cases, an employer must pay all of the wages earned, at the time of terminating an employee, or on aq resigning employee's last day. This time can be extended to 72 hours after resignation if an employee quits without notice. An employer who fails to do so may be required to pay penalty wages of up to 30 days pay (note: this included full pay on Saturday and Sunday, even if the employee doesn't normally work on those days). The final pay due at the end of employment includes vacation pay, which is frequently paid late. Often, these violations are systematic and can lead to costly liabilities to an entire class of workers.

Misclassifying Exempt Employees.

In our experience, most salaried employees who are classified as "managers" are improperly classified as exempt. To be properly classified as an exempt employee, a manager must be paid a salary of no less than twice the minimum wage; and must supervise (which generally must include the power to hire and fire) two or more employees; and must customarily exercise independent discretion; and must spend more than 50% of the time performing those managerial tasks, rather than the same sort of work as their hourly underlings. Often, employers will simply add a small amount of managerial authority to a crew member, call that crew member the manager, and put them on a salary. While there is nothing wrong with do that, it does not excuse the employer from paying overtime if that salaried worker then works more than 8 hours per day or 40 hours per week. If those improperly classified employees work long hours, they may be entitled to overtime pay reaching back four years. If the hours are long enough, the liability can easily exceed a year's worth of ordinary salary. Since the Sav-On case last year, these misclassification cases have well suited for wage and hour class action lawsuits for which liability can be in the tens of millions of dollars companywide.

Failing to Permit Meal/Rest Periods.

Employees working more than 5 hours per day must be provided 30-minute meal periods unless they work shifts of six hours or less and agree to waive the break for that day. If the shift lasts ten hours or more, a second meal period is required.  The employees must be relieved of all job duties and may not have their breaks interrupted with work. In addition, employers are required to permit and authorize employees to take ten minute breaks, with pay, for every four hours of work "or major fraction thereof." That means that the second break obligation applies if a shift exceeds six hours, and a third applies if the shift exceeds ten hours. Employers who do not provide the breaks required under California law must pay the affected employee an extra hour of pay at the employee's regular rate of pay for that day. Our firm has certified several class actions involving meal period and rest period violations. At an hour of pay per employee per day, the liability can be substantial.

Taking or Receiving Tips.

Although tip pooling among non-management employees is permitted, no employer or supervisor may collect, take or receive tips left for by patrons for its employees. We most often see this in restaurants, salons and, surprisingly, car washes.

Failing to Provide Itemized Wage Statements.

Employers must provide an itemized wage statement showing: the employer's name and address, the employee's name and social security number, the payperiod dates, gross/net wages, deductions, total hours worked, applicable hourly rates and hours worked at each rate. Many employers who misclassify employees get into added trouble by not documenting and reporting the actual hours worked on each paystub, resulting in additional penalties due.