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These cases are very complicated and care must be taken that labor laws are followed. The first issue is to know whether your employees are exempt or non-exempt. If you don't know the difference, you must immediately contact an employment attorney to insure that you understand the difference and that you comply with all exemption requirements. For your non-exempt hourly employees, be sure that you maintain accurate time cards/sheets of hours worked and meal breaks taken and that they are paid through a payroll system with statutory tax withholding. If you pay people by some other method, e.g., piece work, per day, salary, commissions, etc., you must review these practices with an attorney. If an employee works any overtime (over 8 hours in a day or over 40 hours in a week) and is paid by one of these other methods (other than purely hourly rate), the overtime calculations become complicated.
If you are paying any person as a "1099" independent contractor, you must immediately contact an employment attorney to be certain that you have not misclassified these people. The penalties for misclassifying people as independent contractors are the most severe of any in the Labor Code. If you are found to have "wilfully" misclassified them, you are subject to monetary penalties of $5,000 to $25,000 PER VIOLATION. This could be a company buster.
Another important point concerning wage and overtime cases is the potential for class action lawsuits. These are cases where one of your employees hires an attorney to sue you for him or herself and ALL other employees who ever worked for you over the past 4 years. These cases can be especially devasting because not only are you potentially subject to substantial verdicts of hundreds of thousands to millions of dollars (even with small employers), the attorneys in these cases will demand from the court that you provide them the names, addresses and telephone numbers of every employee, current and former, and they will then contact all your employees to look for assistance in fighting the case against you. This very disruptive to your business as you are going to get many inquiries of employees as well as "ring leaders" who will cause discontent throughout your company. So its especially important to be sure that you are in compliance with wage laws to avoid these lawsuits.
The good news is that the U.S. Supreme Court has ruled on a case (AT&T Mobility v. Concepcion) that allows you to include a class action "waiver" in your arbitration agreement that now may prevent those class action cases. But you simply must employ these agreements at your company immediately. Our employment arbitration agreement already includes this class action waiver and you can download the agreement for free on our website under the Resources section.
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