December 30 Tip of the Week

“New Year, New Pay Scale”

As we enter the New Year, now is a good time to remind employers that many states and localities have new minimum wage rates that take effect on January 1, 2026.  While it is relatively simple to enter the new rates into your payroll system, that action alone may be insufficient to ensure that you are meeting your obligations under the wage and hour laws of your area.  Wage and hour laws encompass more than the minimum wage.  In some states, they include matters like call in pay, show up pay, overtime, and other additional forms of employee compensation.  As part of the hour aspect of the wage and hour laws, many states require meal periods and mandatory breaks for employees who work shifts of a specific duration.  As an employer, it is your obligation to ensure that you are meeting all aspects of the wage and hour laws and a failure to do so can leave you vulnerable to unpaid wage claims, overtime pay violations, and missed meal period complaints. 

An individual wage and hour claim violation does not, on its face, seem to be too concerning.  You can simply reach an agreement with that person to compensate them for whatever violation they are claiming occurred.  In reality, however, it is not that easy to resolve wage and hour violations and, once a single employee has determined that a violation may have occurred, it leaves the door open for a much larger class action lawsuit that could include all employees.  In addition to the risk of a class action lawsuit, a wage and hour claim can also trigger a state or federal wage and hour audit.  The Department of Labor on the federal level and the state agencies that are responsible for enforcing wage and hour laws may see a single wage and hour claim as a reason to conduct a thorough audit of an employer’s pay practices.  These audits open the door for settlements involving fines and penalties that can be very large.  It is very rare that an employer violates the law with respect to a single employee – rather the claim of the individual employee will generally be repeated over and over again throughout the workforce. 

The best way to avoid the initial wage and hour claim is to perform an internal audit of your pay practices.  This audit should start with a review of the wage rates to ensure that all employees are being paid the minimum wage rate.  Once you have established that the minimum pay rate is applied to all employees, you need to check your pay practices.  Are employees being given duty free lunch periods?  Are employees reporting their time appropriately and accurately? Are employees being given their mandatory breaks under the law?  Are they being paid for all hours worked and overtime for hours worked in excess of 40 in a week?  Are all state wage and hour laws being enforced?  Are you ensuring that improper deductions are not being taken from employees’ pay?  All of these questions are important in ensuring that you are in compliance with the wage and hour laws applicable to your workforce. 

myHRcounsel can assist you in conducting such an audit and in ensuring that you are in compliance with all applicable laws in your area.  In addition to a review of your pay practices, we can also assist you in ensuring that your pay policies and employee handbooks are up to date and legally complaint.  Now is the time to make proper payroll practices a resolution for the new year!