One of the more common legal dilemmas employers find themselves in stems from improperly paying their employees.  It is critical that employers, or designated payroll staff, stay up on the latest in wage and hour laws, related interpretations and requirements.  Paying an employee incorrectly, even if unknowing, can cost an employer thousands of dollars at the very least, and commonly more.  In some cases, small businesses can be devastated and must close their doors.   

Here are some basic practices you should carefully review with an employment attorney, HR consultant, or the labor commissioner’s office to ensure your pay practices measure up.

• Do you have the appropriate Wage Order? Visit www.ca.dir.gov/iwc  for your wage order and read it.
• Are ready to comply with the new CA minimum wage as of January 1, 2008 of $8.00 per hour?  This includes making sure your exempt employees salaries are also at least double minimum wage (in most cases).
• Keep your payroll staff trained on current wage and hour laws.  If you use an outside payroll company, make sure they are knowledgeable and can help you with your payroll questions. Invest in a good payroll system or outside payroll service. 
• Do you really know the difference between exempt and non-exempt?  Many employers make the mistake of treating ‘salaried’ employees as exempt employees.  Review each of the positions you pay straight salary utilizing the proper Exempt Analysis Worksheet.
• Do you pay non-exempt employees a salary or flat/piece rate?  No matter how you pay a non-exempt employee, they are still non-exempt, and must keep time records, take breaks, and be paid overtime.
• Use proper timecards - name, pay period dates, in and out times, meal period times, overtime and double time, vacation, sick or PTO, totals of each, signatures. 
• Are you paying all overtime and double time correctly?  Or are you banking it as comp time?  For most employers, the use of comp time is not allowed (a few exceptions exist). 
• Do employees always take their rest breaks and meal periods?  If not, you may be subject to an additional 1 hour penalty per day for each violation (up to 2 hours per day).
• Do you have non-exempt employees working 4 – 10 hour days?  Did you hold a secret ballot vote with the entire ‘work unit’ to allow for this alternative workweek schedule?  Rules on this are in your wage order.
• Have you classified your independent contractors correctly? Many employers misclassify ‘employees’ as ‘independent contractors’.  This can cost you in back taxes and more. 
• Do you keep documentation of pay changes in personnel files?  Do you have set procedures in place for pay increases?  Do you follow these procedures consistently?   
• Have you established pay scales based on external market, industry data and internal value?  Are you paying your employees equitably within your organization based on legitimate factors (performance, longevity, value)?