Cascade Compensation Toolkit: Compensation Compliance

by Courtney LeCompte on March 27, 2017

in Compensation Toolkit,Compliance

boundary

One critical factor of compensation administration that is often overlooked by employers is compliance with various employment laws. Employment laws often tie to compensation and create boundaries for acceptable employment practices and employee rights.

Here are four common compensation-related employment law violations:

  • Telling employees they cannot discuss their salary with co-workers:

    Oregon passed the Pay Transparency Law, effective January 1, 2016, which protects employees from unlawful discrimination for inquiring about, discussing, or disclosing in any manner individual wages, or wages of another employee. This law does not apply to employees who, as part of their job function, have access to wage information.

  • Exempting an employee from overtime pay:

    Exempt employees must qualify for exemption from the Fair Labor Standards Act (FLSA) and state law overtime requirements and are typically based on the employee’s weekly salary and primary duties. If an employee is not exempt, employers must pay overtime for all weekly hours worked in excess of 40.

  • Asking or allowing employees to work “off the clock”:

    While the FLSA requires that non-exempt employees be paid overtime when working beyond 40 hours in one week, it also requires that non-exempt employees be paid for all hours worked. This includes tasks completed for work outside regular work hours (e.g., checking emails, preparation before a shift starts, mandatory attendance at company events, etc.).

  • Misclassifying employees as independent contractors:

    The IRS determines the status of “employee” or “independent contractor” based on three main categories of qualifications:

    • Behavioral Control
    • Financial Control
    • Relationship of the Parties

    There are several tests that must be used to determine independent contractor classification. Misclassification robs individuals of their rights and benefits and creates unfair competition for law-abiding employers. Consequences for misclassification vary depending on whether the DOL and the IRS classify the misclassification as unintentional or intentional, but typically include fines and penalties associated with tax and wage liability.

Not only will understanding and staying up-to-date with compensation-related laws be your best and most defensible action in terms of pay related legal compliance for your organization, but it will also provide you with the knowledge to develop a pay structure that is fair, equitable, and competitive.

To read the full article, see the upcoming April edition of NewsBrief.

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