Carl Kanowsky, Esq.

A few weeks ago, I wrote about some missteps that employers seem to repeat. I’ve got a few more to share.

Contrary to what you might expect, these mistakes are made by employers of all sizes, even ones with sophisticated personnel departments.

It seems that often, the motivating factor is to save a few dollars. The problem with that strategy is that a small mistake compounded several times over can result in costing much more than any possible savings.

Overtime

Overtime is a common trap for employers. One international company had hundreds of hourly, nonexempt employees report to work 20 to 30 minutes before their shift started.

Once the crew showed up, the employer instructed them to begin assembling files and documents, and to do any necessary online preparation work so that when the workday began, there was no delay with getting geared up.

The problem? The big employer didn’t pay the employees for the time they got ready to begin work.

Yes, there is a de minims argument that a few minutes here and there should not require payment. But what constitutes a “few minutes?” Is it five minutes or 15? Is there a hard and fast, dependable rule upon which the employers can rely?

The answer is no, there is no rule. And because the employer didn’t want to pay for those few minutes, it is now in a major battle to avoid a judgment that it not only has to pay those five to 15 minutes, but must also pay interest, penalties and attorneys’ fees.

What should the employer have done? Don’t play games with an employee’s time. If he or she is performing duties for you, pay the employee.

Independent contractors

Another problem is how to classify workers. Are they your employees, or are they independent contractors? This is another deep, dark hole that many employers fall into.

Some employers want to avoid paying their share of the employment taxes, and some workers like the larger paychecks that come when there are no deductions.

But the government guards its right to collect those taxes jealously, especially in these tight fiscal times. If it gets a whiff of an employer trying to play the “independent contractor” game, it will clamp down.

An example is a manufacturing company with sales representatives all around the country. The company and the sales reps gladly agree they are independent contractors, and they are paid accordingly. But then the IRS or one of the state taxing authorities finds out and conducts an audit.

The audit reveals that the sales reps uniformly work only for the manufacturing company; that they are told which customers to call on; and that are required to come to the factory and to conventions on a regularly scheduled basis.

Even though the company and the reps signed agreements stating they were independent contractors, the IRS ignored those contracts and studied the relationship between the parties. The relationship revealed that the company exerted great control over the sales reps.

Now, the company has to pay the government all unpaid taxes plus penalties and interest. And guess what? The IRS is more likely to come back and check up on the company in the future.

My message to employers: You can hire someone to go over your employment practices now, or you can wait until an employee decides to sue you.

Carl Kanowsky of Kanowsky & Associates is an attorney in the Santa Clarita Valley. He may be reached by email at cjk@kanowskylaw.com. Nothing contained herein shall be or is intended to be construed as providing legal advice.