Doctor Z. Poor Doctor Z. Three months later he still has mass anxiety about another wage and hour investigation. Last time the end result was more than $30,000 in back wages, back taxes and fines.
How? It only takes one unhappy current or ex-employee to start an investigation, and the results are usually unfavorable. Doctor Z really believed he was doing the right thing. After all, if you do the right thing, your business should run well, right? Not if you consider what state and federal laws require of even the smallest businesses. In Doctor Z’s case, it was a medical practice with around 20 employees.
Where did Doctor Z go wrong? In the words of Thomas Edison, “Vision without execution is hallucination.” Where is the hallucination in the small business world? Lack of understanding when it comes to employment laws. Federal laws, such as the Fair Labor Standards Act, and state specific wage and hours laws (meals, breaks, deductions, final paycheck, etc.) will trip those who lack understanding right into a complaint and possible fines.
Doctor Z had no one in a trained administrative role to tell him that some employees were actually non-exempt and due overtime. Doctor Z had no working knowledge of what constitutes hours worked and when deductions from pay are permitted. He also didn’t know that you can’t hold a final paycheck for failure to return property. Result? The last employee he had good cause to terminate wanted to get even. But she was within her right to do so.
Doctor Z had been paying her an average “market rate” salary, but working her 50 to 60 hours per week, without overtime. Her position did not qualify her to be exempt from overtime under the Fair Labor Standards Act. She was not a supervisor, not an executive, nor did she have any type of high level authority with the company. When her performance deteriorated, Doctor Z felt there was good reason to terminate her and move on. The employee was upset. But, there was something else Doctor Z did not know…
Even though Doctor Z was not requiring any employee to keep time sheets (he was just running all as salary, regular each pay period), this employee was tracking her time. With what? The Department of Labor’s handy timekeeping application on her smartphone. She had the proof to show she was due back wages. Doctor Z didn’t have any records of his own to defend himself. Doctor Z also had no defense for taking an unauthorized deduction from her pay when she was blamed for damaging a printer. He also had no defense for holding her last paycheck until she returned company keys.
Too many red flags for the wage and hour department to overlook. They interviewed former co-workers and found there were others, beyond the person who complained, that were non-exempt and also due back wages for overtime worked. Remember that $30,000? That represents two to three years in back pay, plus applicable payroll taxes and fines.
What steps can a business owner reasonably take to make sure this does not happen? Surely, they don’t need a full time, and expensive, HR manager. The bottom line is that there is no easy crash course for a business owner to learn all of this. So what’s the best option for future peace of mind? Consider outsourcing to a professional employer organization (PEO).
What is that? A one-stop full employee administration service. Every time you run payroll, you are charged a fee that covers human resource management basics. The good PEOs provide clients with an HR service representative or team that is on call for questions, communicates employment law compliance information and offers employee management best practice suggestions. The great PEOs even add to that. They provide employment law posters, assist their clients with employee handbook customization and have a multitude of employee management documents and templates that can be customized specific to client needs.
Today, Doctor Z finally has peace of mind. He decided to hire a non-exempt administrative assistant who is very open to building a great service relationship with the HR team of the PEO he chose to work with. They are providing his business with a full spectrum of services including payroll processing, tax administration, workers’ compensation insurance and human resources consulting designed to minimize employment management risk and cut employee termination costs.
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Original Source: http://inspiringhr.com/peo-for-peace-of-mind.html