6 Tips To Help Small Business Owners Avoid Employee Lawsuits

Small businesses can ill afford litigation – not only because of the cost, but also for the time and attention lawsuits can divert from your business.  Here are six tips to help you avoid one of the most prevalent sources of business litigation:  employee lawsuits.

  1. Adhere to nonexempt status. If employees work more than 40 hours per week, they are entitled to overtime pay unless they meet strict criteria and are ineligible according to the Fair Labor Standards Act.  Generally, most employees are nonexempt and must be paid overtime if they work more than 40 hours per week.  You should also know that employees cannot waive their right to overtime pay.
  2. Exempt employee paychecks can’t be docked. While you do not need to pay exempt employees overtime, you cannot deduct from their paychecks for things like arriving late or taking a long lunch.   If you do dock the paycheck of an exempt employee, you have just turned him or her into a nonexempt employee and must pay overtime.
  3. Don’t discriminate. Employers are not allowed to discriminate on the basis of race, age, gender, national origin, disability, religion or pregnancy.  Some states also forbid discrimination on the basis of sexual orientation.
  4. No working off the clock. Hourly employees must be paid for all the time they work, even if an employer has not asked them to do it.
  5. Make reasonable rules. All workplaces need rules to govern behavior and manage expectations, but be careful about making rules that could lead to a discrimination lawsuit.  Keep rules limited to workplace performance standards.
  6. Base pay on job requirements. The salaries you pay should be based on market standards, not on what someone made in their last job or other variables that are questionable.  Two people performing the same job should make roughly the same pay, with allowances for experience and performance.

To learn more about good legal employment practices, call us today to schedule your comprehensive LIFT™ (legal, insurance, financial and tax) Foundation Audit.