If you have even one employee or if you have any “contract workers”, you need to know the basics of wage and hour law. Find out more in this exclusive expert Q & A with employment law attorney Kelly Collins Woodford, J.D., Special Counsel, The Kullman Firm.

1.  Why is it important for small business owners to have a solid understanding of wage and hour law?

Woodford: The Fair Labor Standards Act applies to virtually all businesses. If a business is engaged in interstate commerce and has $500,000 or more in annual revenue, all employees are protected by the Act.  If a business is engaged in interstate commerce and has two or more employees who individually are engaged in interstate commerce activities, all employees of the business are covered, even if the business revenue is less than $500,000.  Even if the business itself is not covered, individual employees are still protected by the Act in any week in which the individual employee performs work related to interstate commerce, including using mail, phones, faxes, or e-mails for interstate communication.

2. What are some of the most common problems entrepreneurs experience in terms of wage and hour law compliance when they first start hiring employees?

Woodford: First, failing to pay employees for all “hours worked” and overtime for hours worked beyond 40 in a workweek, whether those hours were specifically authorized or not.  Second, assuming that employees who are paid a salary are not owed overtime.  Generally employers must pay overtime unless an employee is paid on a salaried basis and meets one of the Department of Labor’s “duties tests.”  Third, failing to include non-discretionary bonuses and other compensation in the “regular rate” used for payment of overtime.  Finally, failing to comply with the limitations on child labor.

3. What are the most important steps small business owners can take to remain compliant with applicable wage and hour laws?

Woodford: Keep accurate time records. Provide training for supervisors and managers on wage and hour law, particularly recordkeeping and hours worked issues. Carefully review any and all positions classified as exempt from overtime to ensure the position meets the duties test and the method of payment complies with the salary basis test.  When in doubt, consult with an employment lawyer.

4. What are the most likely consequences of noncompliance with wage and hour laws?

Woodford: Back pay for minimum wage and overtime violations.  Civil monetary penalties for child labor violations.  The Department of Labor does have the power to seek injunctions to stop the sale or shipment of goods produced in the United States in violation of the child labor, minimum wage, or overtime provisions of the Act.