Time is money, particularly when already expensive litigation takes away time and attention you should be giving to your business. Lawsuits are potentially catastrophic for small businesses, so here are six simple steps for preventing one of the most frequent forms of business litigation: employee lawsuits.

1.  Adhere to nonexempt status.  The Fair Labor Standards Act was a landmark piece of legislation, but even more than 60 years after its enactment business owners still forget one of its principal obligations: employees spending over 40 hours per week on the clock are entitled to overtime pay. Though there are a few exemptions, the job positions at the average small business are unlikely to fall into the very narrow criteria for eligibility. Don’t forget, employees cannot waive their right to overtime pay.
2.  Exempt employee paychecks can’t be docked.  If you do have exempt employees, remember that though they don’t receive overtime, your right to deduct from their paychecks in the event of late arrivals at work or a longer-than-allowed lunch is zero. Docking the paycheck of an exempt employee results in a sudden transformation: exempt one minute, nonexempt the next. Unthinkingly removing their exempt status will result in you paying for their overtime.
3.  Don’t discriminate.  This should go without saying, but employers are strictly barred from discrimination on the basis of race, age, gender, national origin, disability, religion or pregnancy. Furthermore, Minnesota is one of a growing number of states that prohibit discrimination on the basis of sexual orientation.
4.  No working off the clock.  Though an admirable show of drive if done without request of the employer, employees must not work off the clock. An employee must be paid for all the time he or she works or the employer may face harsh legal action.
5.  Make work rules about work.  Rules are a vital component to any well-functioning workplace. By governing behavior and managing expectations, clear, reasonable rules will generate a positive work environment and protect you from lawsuits. However, take particular care to leave out anything that may lead to a discrimination lawsuit. The rules of a workplace should be about performance standards rather than the employees’ personal lives.
6.  Base pay on job requirements or on measurable performance.  Do not let personal bias sway the compensation you offer an employee. The market typically defines the average salary for specific positions and two people with the same job, experience, and skills, should receive roughly the same salary, or you can structure pay to be strictly performance based, so that differences in compensation come from differences in each person’s actual achievement of specific, objective, measurable results. Either way you choose to do it – make sure you have made a level playing field.

To learn more about good legal employment practices, call us today at (612) 206-3701 or fill out our contact form to schedule a business consultation session.

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