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10 Ways Your Business May Be Breaking Laws

October 5, 2017



Do you think of yourself as a cool or relaxed employer? Well, a report by the California Chamber of Commerce, which you can find here, revealed that many small business owners and managers are likely violating numerous employment laws simply because they are trying to be a cool or flexible boss and providing a laid-back atmosphere for employees. 


I recommend taking a look through the report, but here is a summary of its findings on the ways small businesses are violating employment laws:


Improperly classifying employees (sometimes all employees) as exempt employee


In California, an exempt employee is usually someone who is paid at least a specified amount of money regardless of actual time worked in a week. Often, exempt employees are managers or office administrators and there are some. Under both state and federal law, these employees are sometimes exempt from overtime, meal, and rest break requirements. 


Employees who do not meet one of the exemptions are termed “non-exempt” and subject to California’s strict overtime, meal, and rest break laws. 


Issues tend to arise when employers decide its easier to consider employees exempt and pay them salaries rather than navigate the meal, rest break, overtime, and time sheet requirements. Many businesses are sued for failure to provide meal periods and rest periods for non-exempt employees that are improperly classified as exempt. 


Flexible lunch breaks 


Federal law doesn’t require employees to be given lunch or rest breaks, but most states require that non-exempt employees have at least a 30-minute lunch break, plus additional shorter breaks for hours worked. For instance, California employees are entitled to a lunch break before the end of their fifth consecutive hour of work. Sometimes, employers allow employees to skip lunch so that they can leave work early, but by doing so, they are breaking this California law. You can refer to the California State Labor Office for more information. 


Classifying employees as independent contractors 


This particular issue is a springboard for litigation, and can also lead to big penalties from the IRS. Being an independent contractor may mean higher upfront wages for employees, but it also means no employee benefits like paid leave, workers’ comp, and disability income issues. It is important to be aware of the various laws regarding this issue, and you can read more about it in one of our previous posts here


Failing to provide adequate harassment and discrimination training to managers and supervisors


States have different laws when it comes to this issue, but California mandates this type of training. Small businesses need to train first-line supervisors on this issue. Refer to the California state requirements for harassment training and check with California’s State Labor Office (or, of course, Verhagen Bennett LLP) about any discrimination training you may need to conduct. 


Allowing employees to determine their work schedule


California requires employers to compensate employees for overtime worked, with no exception. Overtime is defined as any time over 40 hours in a workweek, or over 8 hours in a single day. Some employers, particularly small businesses, often let their employees worked as much as they want without properly compensating them. This can lead to substantial penalties and costly litigation. 


Terminating employees for taking time off


California law protects employees from being fired because they have taken or are taking family or medical leave, military leave, or serving on jury duty. Find more on this subject