Myth Number 1:
“If I make her a ‘salaried’ employee, I don’t have to pay overtime.”
FALSE: You cannot avoid paying someone overtime simply by calling them a salaried employee. An employee’s entitlement to overtime depends entirely on the duties they perform. Generally, the law provides that executives, professionals, and high-level administrative employees do not have to be paid overtime if their salary is at least $23,660 a year. (Effective December 1, 2016, the minimum salary threshold for exempt employees goes up to $47,476/year). Before classifying someone as an overtime-exempt salaried employee, make sure that their actual job duties fall within one of the legal exemptions. https://www.dol.gov/whd/overtime/fs17a_overview.htm
Myth Number 2:
“I’ll just make him a ‘1099 contractor,’ this way I don’t have to worry about payroll taxes [or minimum wage, overtime, benefits, etc.].”
FALSE: Whether someone is properly classified as an independent contractor or an employee depends strictly on the actual facts of each case. Simply designating someone an independent contractor (even if there is a written independent contractor agreement) is not enough. Generally, if you have the ability to control the “manner and means” of the individual’s performance, or if the individual performs functions that are essential to your day-to-day business, he will be considered an employee, and you will be liable for any unpaid payroll taxes and failure to comply with other employment laws. Before hiring someone as an independent contractor, think carefully about the true nature of the relationship and review the various factors considered by both the IRS and Department of Labor.
Myth Number 3:
“I know my employees work a lot of overtime, so I pay them a generous flat rate to cover those extra hours.”
FALSE: Non-exempt employees must be paid at 1.5 times their “regular hourly rate” for all hours worked in excess of 40 per week. You cannot avoid this requirement by paying employees a higher flat weekly amount to cover all time worked. If you do pay employees a flat amount for all hours worked, you will still be liable for paying them “half-time” overtime, which would be calculated as follows: (weekly pay ÷ number of hours worked that week) ÷ 2 x (number of overtime hours worked that week). If you are a New York hospitality employer, you are legally required to pay non-exempt employees by the hour, not at a flat rate. If you do pay a flat rate, you will still be liable for “time-and-a-half” overtime, calculated as follows: (weekly pay ÷ 40 hours or number of hours actually worked that week, whichever is less) x 1.5 x (number of overtime hours worked that week).
Myth Number 4:
“If my employees are ‘short’ or break my equipment, I can deduct it from their paycheck. Why should I have to pay?”
FALSE: Most states, including New York, prohibit making deductions from employees’ wages for things like register shortages, breaking equipment, spoilage, or other losses caused by the employee. In fact, there are strict limitations on what deductions can be made from an employee’s paycheck. For example, under New York law, deductions are permitted only for: (1) items authorized by the employee for the employee’s own benefit, such as insurance premiums, prepaid legal plans, pension or health and welfare benefits, discounted parking or mass transit passes, and gym membership dues; (2) wage overpayments due to the employer’s clerical or mathematical error; and (3) recoupment of advances of wages, PTO, vacation, or sick days. (There are specific paperwork, timing, and other requirements for these deductions, so you should consult applicable regulations.)
Myth Number 5:
“I know my employee performs work outside her normal schedule, but I can’t control what she does on her own time. Since I never asked her to do the extra work, I don’t have to pay her for it.”
FALSE: The law requires you to pay employees for all hours they are “suffered or permitted to work.” This means that, if you know that an employee is performing work “off the clock,” you must pay the employee for that work — even if you did not ask her to do it. For example, if an employee punches out at 5:00, but you know that she then spends 15 minutes cleaning, correcting errors, making a delivery on the way home, or dropping off your mail, you must pay her for those 15 minutes. If your employees are working off the clock, you should either pay them for that work, or implement a policy prohibiting off the clock work and enforce that policy with appropriate disciplinary measures, such as written warnings, suspension, or termination.
Bonus Myth Number 6 for Restaurant Employers:
“I can make my waiters share their tips with the chef and kitchen staff. After all, they all provide service to the customers, and without the kitchen staff, there would be no restaurant.”
FALSE: It is unlawful to require tipped service employees, such as waiters, bussers, sommeliers, and food runners, to share tips with non-tipped back-of-the-house employees (such as cooks, expediters, and other kitchen staff) who do not provide direct service to diners. In addition, you cannot require employees to share any portion of their tips with any member of management. The penalties for improper tipping practices can be severe, so you should carefully review all applicable hospitality regulations in your state. Better yet, ask a qualified employment attorney to review your tipping policies for legal compliance.
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