Massive class-action lawsuits against Wal-Mart have propelledalleged violations of wage-and-hour laws into the headlines. Butcompanies of all sizes are contending with a rising tide of suchclaims.

For smaller employers, the bottom line impact may be far greaterthan for Wal-Mart.

Wage-and-hour laws mandate that certain employees should be paidat hourly rates and be eligible for overtime payments. Theseemployees are commonly referred to as “nonexempt” employees becausethey are not exempt from overtime laws.

A common misconception among employers is that if you simply paysomeone a salary they are automatically classified as exemptemployees. In reality, the determination of whether an employee isexempt or nonexempt turns on the functions they perform in theirjob, not the way in which the employer has elected to pay them.

Consider this example.

A fast food restaurant employee who has been paid on an hourlybasis is promoted to assistant manager. As a result the employee isnow considered to be exempt and is paid a salary rather thanhourly. He performs all of the same job functions–the onlydifference being that he has been given a key and can open or closethe restaurant as necessary.

There is a big difference in the amount of money he takes home,however. He works the same hours as before the promotion, but hedoes not get paid overtime. In essence, he is doing the same jobfor less pay.

Many cases have been brought on behalf of such employeesclaiming that their new jobs have been improperly classified asexempt and that they are entitled to receive overtime pay. These“reclassification” claims are often brought as class actions andcan be very costly both in terms of defense and resultingliability.

Wage-and-hour cases can be brought on a variety of theorieseither by single plaintiffs or as class action suits. In many casesa wage-and-hour violation may result in a modest sum owing to asingle plaintiff, but if the same violation occurred in calculatingwages for hundreds or thousands of employees, the aggregate awardcan be significant.

In situations where the potential payback for an individualclaimant would be dwarfed by the costs of litigation, it may makesense for claimants to band together to pursue a class action. Thisis why wage-and-hour laws are fertile ground for class actionlitigation.

One of the most common allegations in wage-and-hour cases isthat there has been a miscalculation in the amount of wages owed.This may be due to a variety of reasons:

o The wrong rate was applied to hours worked overtime.

o Meal and rest periods were not granted, were too infrequent,or were too short.

o Tips were improperly credited in determining wages.

These issues may appear simple but can pose complex problems inpractice, especially given that employers must comply with bothstate and federal wage-and-hour laws–and, in some areas, localmunicipal rules as well.

Factor in the complexities of doing business across state linesand it is easy to see how mistakes can arise.

Even more complex are the problems posed by so-called“off-the-clock” work.

The proposition that employees are entitled to be paid wages forhours worked may appear clear cut, but consider the example ofworkers who are required to wear uniforms while on the job. Ifthese workers arrive at their workplace, don their uniforms, thenclock in to work, clock out again and take off their uniformsbefore returning home, a wage-and-hour violation may haveoccurred.

If the uniform is required to be worn as part of the job, theemployees' work day may be deemed to start when they begin puttingthe uniform on, and end when they have finished taking it off.

A similar issue is presented by requiring employees to attendmeetings or training sessions. If the meeting or training isconsidered to be mandatory, then the time employees spend at themeeting is considered to be compensable.

Similarly, if an employee arrives at their job early and beginsthe work day by logging onto the computer or performing otherjob-related tasks in anticipation of the work day, that time isalso compensable and failure to include that time in thecalculation of wages may lead to a wage-and-hour suit.

Another gray area is travel time. The time an employee spendstraveling to and from their place of employment is generally notconsidered to be included in hours worked and therefore notcompensable.

But consider the following example.

Employees of a landscaping company are picked up by the jobforeman at their homes before the start of their shifts. Thelandscaping company may end up giving these employees more than afree ride.

If the foreman makes use of the travel time by briefing theemployees on their assignments for the day, a court may decide thatthe workday started when they got into the company vehicle andbegan participating in this “meeting,” entitling them to paymentfor the time spent traveling.

Wage-and-hour rules abound with such subtle but materialdistinctions. The first challenge for employers is, whereverpossible, to identify them up front and avoid the traps that canland the unwary with expensive lawsuits and unwelcome publicity.Online risk management advice from a trusted source can beparticularly helpful in this context as the interpretation ofwage-and-hour laws is constantly evolving.

The second necessity is broad, robust insurance coverage for thetraps that still prove elusive.