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Today’s employment landscape is characterized by strict mandates set forth by both New York State Labor Law and the Federal Labor Standards Act (FLSA).
It is common knowledge that an employer is required by law to pay “on the books”—that is, traceable, properly recorded payments, that maximize the probability of tax compliance. If an employer instead pays in cash, it is almost automatically failing New York State disclosure requirements. And since, in that scenario, the employer is likely not paying Federal Insurance Contributions (commonly known by its abbreviation “FICA”) and other necessary costs, they also expose themselves to liability from the New York State Department of Labor.
Other well-known states and federal payroll compliance laws require that employers pay time-and-a-half for overtime work. Perhaps less commonly known is that employers must also sufficiently document any overtime pay.
Consider the following example:
An employee’s base wage is $10 per hour. She receives $400 per week for 40 hours. One week, she works 60 hours, and the employer, in a good faith attempt at compliance, pays her, under the law, $15 an hour for each of those 20 extra hours, totaling $700 for the week (an average of $11.67 per hour). If the employer does not record and communicate to the employee that the increase in pay was due to overtime, the employee could easily bring a disingenuous lawsuit against her employer, alleging that she received a raise to $11.67 an hour and that she worked 20 hours of overtime without properly being paid time-and-a-half.
Without proper documentation, the court’s presumption will consistently fall on the side of the employee. Definitively, in this particular scenario, by law, the employee is assumed to be right and the employer wrong. It will not matter that the employer was attempting to follow the letter of the law and that the employee is being dishonest.
While this example considers only one week, it could just as easily be a year. Costs can add up.
Even more worrisome, this type of litigation has the potential to quickly escalate into a collective action, involving numerous employees. When an employee makes a complaint, his or her attorney is likely to ask that he or she approach coworkers (or former coworkers, as the case may be) in efforts of expanding the case. Before long, one disgruntled employee can turn into 10 or more.
Further, the employer may also encounter statutory fees. Compensatory and punitive fees are addressed separately by federal and state standards, and it is possible to get them from both venues, in addition to court costs and attorney fees for both sides. Altogether, the employer could be facing tremendous costs.
These are just a few of the myriad requirements employers face today. Laws are constantly changing. It is very much in your best interest to make sure you are in full compliance with all updated requirements and protect yourself from damaging loss. This article barely scratches the tip of the iceberg, but the takeaway is simple: Be diligent about the labor laws in your state, and document everything.