Trying the most complex issues
for over 30 years.

Trying the most complex issues for over 30 years.

3 ways businesses can limit the risk of a wage and hour lawsuit

On Behalf of | Feb 4, 2025 | Employment Litigation

Employees keep a company functioning. They provide labor and knowledge that allows the company to offer goods or services to the public. Unfortunately, employees can also be one of the biggest sources of liability for an organization.

Workers may sue their employers for a variety of different reasons. Disputes about wages and payroll practices are among the most common reasons that workers pursue legal action against their employers. Wage claims brought by workers can result in financial setbacks. They can also damage a company’s reputation.

How can employers help limit the likelihood of workers filing wage and hour claims against them?

1. With thorough employment contracts

Disputes about wages often begin with disappointed expectations. Workers may believe that they have a right to bonuses or incentive pay. They may then take legal action when the company does not meet their expectations.

Employers can reduce the likelihood of frustrated workers filing unnecessary lawsuits by having very clear rules regarding wages, benefits and bonuses in employment contracts. So long as the company clarifies wage standards and follows the promises made in employment contracts, the organization can reduce the chances of workers initiating legal action against the company.

2. With proper internal records

Sometimes, employers lose wage claims or feel forced to settle because they cannot successfully defend the company. The failure to maintain adequate records regarding payroll practices can put businesses at a disadvantage if workers try to pursue wage claims in the future.

Generally speaking, federal wage regulations require that companies maintain all relevant payroll documentation for at least three years. Ensuring compliance with that rule by maintaining digital records that have appropriate backups can reduce the likelihood of a company facing claims that it cannot successfully counter in civil court.

3. With careful scheduling practices

A significant portion of the wage claims brought against businesses relate to unpaid overtime. Hourly workers who put in more than 40 hours in a specific pay period generally have the right to receive 150% of their typical hourly wage for that excess time worked.

Companies can prevent costly overtime wage claims by proactively limiting overtime. A no-overtime policy generally isn’t enough to achieve that goal. Employers likely also need to be proactive about scheduling to ensure that no worker ever puts in enough time to qualify for overtime wages.

With the right employment policies and practices, companies may significantly reduce the likelihood of wage and hour litigation. Complying with regulations and communicating pay practices effectively to workers may limit the chances of major disputes eventually turning into litigation.

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