California and federal wage and hour laws strongly favor employees. Verdicts and settlements in wage and hour lawsuits can be extremely expensive for employers. Recent settlements in particularly egregious wage-and-hour class-action lawsuits were as high as $10 million.

Employers of all sizes, including those with only a few employees, need to be aware that they could be the target of wage-and-hour claims. Even employers who think they have great relationships with their employees could be on the receiving end of a lawsuit. If you are a dentist, doctor, optometrist, or veterinarian, you should know about the wage-and-hour rules that apply to your practice. Equally important is to take effective steps that will prevent wage-and-hour claims and lawsuits from arising in the first place.

Even for small employers, being hit with a wage-and-hour claim can result in hefty penalties and fines. Employers may be the target of private lawsuits brought by employees and/or actions by government agencies, including the Division of Labor Standards Enforcement in California and, on the federal level, the U.S. Department of Labor, which enforces wage-and-hour rules through the Fair Labor Standards Act.

Even when a claim has no basis in fact, employers will still incur the considerable expenses of defending themselves against the claim. Prevention is a much better option that will save you money, time, and aggravation.

Wage-and-hour law is complex and detailed, and it changes frequently. The lawyers at Dental & Medical Counsel are available for consultation to help you stay abreast of the relevant new laws and regulations. And through our sister company HR for Health who specializes in HR Compliance, we can also help you design systems and procedures that will keep you in compliance with local, state, and federal rules and help prevent costly wage-and-hour claims.

Common Mistakes That Make Doctors and Dentists Vulnerable to Wage-and-Hour Claims

The most common mistakes that employers make that violate wage-and-hour rules include:

• Not paying overtime when required to do so. This includes misclassifying employees as “exempt” from the overtime rules when the employees should have been classified as “non-exempt,” which is the category that most employees fall under.
• Paying below the minimum wage. You must keep up with state, local, and federal changes to minimum wage laws.
• Misclassifying employees as independent contractors. If you lose a contractor/employee misclassification suit, not only will you have to pay any back wages that are owed to the worker, but you will also have to pay the payroll taxes to the IRS that you didn’t pay because you had classified the worker as a contractor. To make things even worse, you will have attracted the government’s attention and could be subject to more frequent government audits in the future.
• Not providing required work and rest breaks. These are especially complex in California. It’s easy to make a mistake if you don’t have good procedures in place.
• Failing to pay non-exempt employees for all their hours, including for work-related travel time or time spent attending required training or meetings held during working hours.

How to Prevent Claims That Overtime Wasn’t Properly Paid

To prevent being sued for unpaid overtime, you should know your state and federal overtime rules and be scrupulous about following them. Never ask or require a non-exempt employee to work “off the clock.”

California law requires (with some exceptions) that you pay:

• Time-and-a-half when employees work more than eight hours in a day (up to 12 hours).
• Double time when employees work more than 12 hours in a day.
• Time-and-a-half when employees work more than 40 hours in a week.
• On the seventh consecutive day of work in a week:
  • Time-and-a-half for the first eight hours.
  • Double time after eight hours.

Federal law simply requires that you pay time-and-a-half for hours worked over 40 in a week. However, if your practice is in California, you have to abide by the state’s far more stringent rules.

You must pay overtime, when required, to non-exempt employees. It’s illegal to offer them compensatory time off instead.

Per HR for Health, to provide a defense in case you are sued, you should keep accurate and detailed records for every hourly employee of their hours, their pay, how much overtime they received, and any special circumstances.

Mistakes Made in Misclassifying Employees as Exempt

The overtime rules apply to most employees. However, some executive, administrative, and professional employees are exempt from those rules. Exempt employees may be paid a salary, instead of an hourly wage, and they do not have to be paid overtime.

Employers often get into trouble with overtime violations when they treat employees who should be non-exempt as if they were exempt. The rules for classifying employees are complex and involve analyzing several factors, including the employees’ primary duties, their education and knowledge, and their salaries. The rules can change and, in fact, a new federal rule that went into effect at the beginning of 2020 increased the number of employees who must now be classified as “non-exempt.”

An important step in classifying employees correctly is to find out what they actually do at work, not just what their job descriptions say they do.

How to Prevent Claims That You Didn’t Pay Minimum Wage

In California, the minimum wage has been rising every year since 2017. It’s important to keep up with the changes. As of now, the minimum wage is scheduled to continue to rise annually until 2022 for employers with more than 25 employees and until 2023 for employers with 25 or fewer employees. At that point, the minimum wage will reach $15 per hour.

The federal minimum wage is only $7.25. Again, though, if you are in California or another state that has a higher minimum wage, you must pay the higher amount. Some cities have their own minimum wage laws, including many of the Bay Area cities, so you need to be aware of any local rules as well.

Accurate record-keeping will help you prove what you actually paid if an employee files a minimum-wage claim against you.

How to Prevent Work-Break Claims

Work-break rules in California are complex, and employers should have procedures in place to ensure they are complying with the law.

In California, employers must provide meal breaks for non-exempt workers. With some exceptions, an employee must get:

• At least a half hour for a meal break if they work more than five hours in a day.
• Another meal break of at least a half hour if the employee works more than 10 hours in a day.

The first meal break may be waived, by mutual consent, if the employee works no more than six hours in the day. The second break may be waived, again by mutual consent, if the employee has taken their first break and works no more than 12 hours in the day.

Employees don’t have to be paid for their meal breaks if they are relieved of all duties during their breaks. Employees may only be on duty during their meal breaks in certain circumstances, and there has to be a written agreement. On-duty employees must be paid for their breaks.

Federal law does not require that employees be given meal breaks. As always, when California (or other state or local) law is more stringent than federal law, you should follow the stricter requirement.

Mistakes Made in Misclassifying Employees as Independent Contractors

In California, employers who knowingly misclassify an employee as an independent contractor may have to pay civil penalties of $5,000 to $25,000 for each employee. California law on employees/contractors changed dramatically recently with the 2109 passage of Assembly Bill (AB) 5, which makes it harder to classify a worker as an independent contractor. The law is still in flux and was revised extensively in 2020. Several other states have also recently implemented or are considering laws that are similar to California’s.

Federal law also prohibits misclassification of employees as independent contractors. The federal test for whether a worker is an employee or a contractor is different from California’s test and requires weighing several factors, including how much control the employer exerts over how the worker does their job. If you are found to have misclassified a worker, you may have to pay the IRS the back employment taxes that you didn’t pay them before.

Preventing Problems with Wage Statements

In California, wage statements must contain nine specific items: gross wages, net wages, pay period, total hours worked (for non-exempt employees), all hourly rates and hours worked at each rate, all deductions, piece-rate info (when applicable), employee’s name and ID number or last four digits of their social security number, and employer’s name and address. If your practice is in California, you should ensure that your payroll system is set up to provide all the required information.

Also, you may not take any deductions from your employees’ pay unless those deductions are authorized by law.

Other Ways to Help Prevent Wage-and-Hour Claims

• Always pay your employees on time.
• Make sure to pay final wages that are due when an employee resigns or is terminated. In California, employers who fail to do this correctly may face penalties of up to six weeks of wages. The rules are that you should pay the employee:
  • On the last day the employee worked if the employee was terminated.
  • Within 72 hours if the employee quit or resigned without notice.
• Another California requirement is that (with exceptions) you must pay employees at least twice in every calendar month.
• Pay commissions when they are earned.
• Don’t change employment agreements retroactively.
• Be careful when using interns or volunteers, or inviting potential candidates in for working interviews. If their primary duties are the same as those of paid workers, they will probably have to be paid too.
• Anticipate potential increases in wage-and-hour litigation. If there’s an economic downturn, and employees have to be laid off or fired, they may focus their frustration by suing their former employers.

• Make sure your time-keeping procedures are effective and accurate.
• Understand the rules for when you have to pay employees for travel. Federal law requires (with some exceptions) paying non-exempt employees for their travel time when the travel is for the benefit of the employer.
• Train your managers and supervisors in how to be in compliance with federal, state, and local wage-and-hour rules.

How Dental & Medical Counsel Can Help

It’s difficult for a busy dentist or doctor to keep up with all the requirements and changes in federal, state, and local wage-and-hour laws. It’s also not the best use of your valuable time. The experienced employment law attorneys at Dental & Medical Counsel are available to help you get and stay in compliance with all the wage-and-hour rules that apply to your practice.

Prevention is your best bet. Dealing with a wage-and-hour claim or lawsuit, even one that is unfounded, is a time-consuming and potentially very expensive ordeal. You could face civil and even criminal penalties. The government or your employee could sue you, and if it’s found you owe back wages, you may have to pay the wages and then double the payment as a penalty. You might also have to pay court costs and attorney’s fees.

We can answer your questions about whether you are in compliance with the applicable rules regarding specific circumstances you are unsure about. We can also do an overall wage-and-hour audit to identify any violations and to put measures into place that will help keep you in compliance in the future.

Specific issues that we can help you with include:

• Independent contractor versus employee classifications.
• Exempt versus non-exempt classifications.
• Setting up effective payroll and timekeeping procedures.
• Creating policies that will keep your practice in compliance.
• Training your supervisors and managers.

We would be glad to talk with you and tell you more about how we can help you avoid wage-and-hour claims. Contact Dental & Medical Counsel today by calling 925-999-8200 or by submitting a contact us form to schedule a complimentary consultation with attorney Ali Oromchian.