From Lawyer to Employer: Season 4, Episode 3: Paying It Right: Wage & Hour Rules Every Employer Should Review

Keegan Drenosky: That's right Dan. And our presentation really, it covered a lot of different wage and hour laws, but you can't really fit everything into an hour because to your point, this is an area that's really dense and it's something employers really have struggles with, and there's a lot of pitfalls that they can fall into if you're not paying attention to this.

We don't necessarily have a ton of new laws in this area over the past year, but there's been a number of things that have changed based on the administration and looking at various states, uh, when you have employees in, in other states that you need to be aware of. So we tried to cover as much as we could during our presentation, but, uh, really this is something that employers need to be keeping up with, all throughout the year to make sure they're complying with the various laws.

Dan Schwartz: Yeah. So let's dive right into the presentation and some of the topics that I think were covered. And I, I have to start with classification or frankly misclassification. This has been an ongoing topic between employees versus independent contractors. Still a major issue, right?

Keegan Drenosky: Definitely still a major issue.

In 2024, we had a rule come out under the Biden administration on the federal scope about how employees versus independent contractors are classified, and it was really a more employee friendly test looking at the totality of the circumstances. But now we have a new administration and the DOL has basically said, you know, that rule is on hold.

We're going back to basically 2008 and looking at. What they call the economic reality is that is still a seven factor test, but is a little bit more employer friendly. There's not as much guidance and looking at a variety of factors. Then to make things even more complicated, you have a state test in Connecticut called the A BC test, which is much stricter and harder to get someone classified as an independent contractor, as an outside consultant, and really looks at the control aspect and there's a couple of key factors.

So it's. Whether a worker's free from control or direction, if the work done is outside the usual course or place of business, or if a worker's engaged in independent trade or business really of the same nature as what they're doing for the employer. So if you have several tests, you really have to meet them both in order to classify someone in Connecticut as an independent contractor, which I think is still difficult to do, regardless of which of the rules the federal government is using at the moment.

Dan Schwartz: Yeah, I, uh, I think that's a great point. Connecticut's a PC test is. Particularly tough to meet so many contractor roles, may be employment roles, and you could have a situation, I suppose, where an employer satisfies the economic realities test, but doesn't meet the A BC test. Right.

Keegan Drenosky: Absolutely, and, and that's the problem and the reason you really need to look at both different tests and the reason an employer should care about this area is, you know, if you misclassify someone, and this happens sort of again and again, if you're audited by the federal or Connecticut, DOL, it can be a, serious damages.

There can be back pay, unpaid overtime, even tax penalties if there's a lawsuit about this as well. So really something you want to try to audit internally and make sure you're getting this right.

Dan Schwartz: Is there any type of documentation that an employer can have at least to help support any decision that they make?

Keegan Drenosky: Absolutely. Um, you know, you wanna have a consulting agreement with the people that you're, your service providers, you're using as independent contractors and have various clauses in there that establish the relationship. But at the end of the day, um, that's only gonna be as good as, is this happening in practice?

Is the control, you know, really by the employer or is it. Separate with the independent contractor. So if you put it in the consulting agreement, that's helpful, but you wanna make sure you're following that agreement and practice as well.

Dan Schwartz: Yeah, so, I I, I always chuckle when I hear from someone that refers to one of the people that works for them as a quote 10 99 employee, because there is no such thing.

And yet somehow there are employers out there and, and frankly, employees slash independent contractors who are happy with the arrangement, who are fine with. Taxes not being withheld, but I think that really does present some real risk to employers in that situation. So it's uh, a sort of a lesson to be learned, right?

Keegan Drenosky: Yeah, absolutely.

Dan Schwartz: So let's, uh, switch gears and talk about another topic of sort of compensable time and breaks. And I think another topic that I heard was talked about at your presentation was the notion of hours worked. So what should employers keep in mind for, for this hours worked designation.

Keegan Drenosky: So when thinking about this, you know, employers need to make sure they are compensating employees, not just for the time that they think they're doing work, but potentially other time as well.

Like waiting time is an employee engaged to wait if they're on call and required to remain on premises for some individual employers that have. 24 hour employees that may be sleeping at the location like a home care facility, do they need to be paid for all 24 hours? And the answer is no. You know, you can deduct certain sleeping period time, but you need to be aware of how those laws work.

Travel time is a big one. That can be, you know, tricky to deal with both Connecticut and federal laws if someone's traveling out of state. During working time or outside of working time is sort of what you need to be looking at. And we look at really what we call the predominant benefit test. And that helps determine if break time is going to be unpaid.

So if the employee's time mainly benefits the employer, it's going to be paid time. And Connecticut really adds its own twist to this, which is, um, if we have, you know, some. Break time for lunch. Employees who work seven and a half consecutive hours have to get a 30 minute meal break unless there are some narrow exceptions that apply and it has to happen, you know, at certain times within the day.

So that's something I've seen employers really struggle with in these various different categories of what do we need to compensate and what do we not need to compensate? And then making sure that that's recorded when taking into account, how do we figure out what the. Overtime payments should be so, you know, if we're not excluding, uh, a lunch period or we're just automatically deducting it from someone's paycheck.

Now are we miscalculating overtime when they're, you know, working over 40 hours in a week? So that's where sort of the penalties start to really add up.

Dan Schwartz: Yeah, you just mentioned something that I'm not sure people have given much thought to, and that's the sort of auto deducted lunch breaks, right? Some of the payroll programs can say, oh, you can automatically put in for your employees generously that they take 30 minutes lunch, but that may not be a good thing, right?

Keegan Drenosky: That's right. If they're not actually taking it in practice. And, and someone asked about that when we gave this presentation at the hotel, Marcel, and it's interesting because they're trying to help with this new software, these payroll apps, uh, AI that basically just deducts the 30 minutes with the assumption that an employee's taking that break.

But if they're not signing off on that, you know, if they can't go in and change it on a day that they cut the break short. That can really be problematic. So whether it's going back to the paper time sheets or just making sure you have software that works so people can put in the time they're actually taking the break is really important.

Dan Schwartz: Yeah. Let's stay on this topic about pay, because I've certainly seen the sort of. Continued issues that employers have with calculating pay. And you would think with some of the technology it would be getting easier to do, but we're still seeing some common mistakes here. And I think you mentioned one of 'em, which was, which was miscalculating overtime, right.

Keegan Drenosky: That's right. And you know, if you think about it, if you're deducting time that people were really working, then you're underpaying them both for the regular hours and you're not taking into account that time for determining what should be their regular rate. So it really is problematic. I mean, I've had several employers be audited on that issue.

I mean, it ends. You know that maybe you don't owe that much for the actual missed lunch break, but then if they're not exempt employees, the, the overtime really can be the issue as it so often is.

Dan Schwartz: Yeah. What about things like bonuses? Do bonuses get included in, in the regular rate of pay?

Keegan Drenosky: That's another really, uh, interesting question and it really depends on the type of bonus and if it's discretionary or not.

But you know, I've seen the DOLs take sort of a hard line on that, and unless a bonus is, you know, a Christmas bonus that the company did well and everyone's getting it, it wasn't pre-planned. Things like spot bonuses for performance, those are really viewed as non-discretionary because they're tied to a specific performance metric.

Then those are gonna be calculated into the regular rate in order to determine the overtime rate. You know, if someone gets a spot bonus one week, um, and it's for that performance in that week, it needs to be added into their total comp in order to then determine the time and a half. And that's something that a lot of employers struggle with.

They think they're doing something nice, you know, by giving employees this bonus. And actually they're ending up. Getting in hot water and now they're gonna owe them overtime and it sort of snowballs if this continues happening.

Dan Schwartz: Yeah, so I, I would think in that instance, having some clear documentation and a good bonus policy that you've perhaps run past an employment lawyer might be useful in this area.

Keegan Drenosky: Definitely. I think that's a great idea. And also just making sure that when you're giving the bonus, you're clear about sort of what it's for and what period of time it needs it's applying to. So if it's for, like I said, a Christmas bonus or if it's for, um, work in a certain quarter so that you know when you need to apply that to.

Dan Schwartz: Interesting. So staying on that topic, we have been talking, and I've been hearing from employers a bunch about pay deductions, pay transparency, and there have been some developments there over the last couple of years. Some new, some not, uh right. Deductions have always been an area that employers need to be.

Careful of, but some of the pay transparency rules are in effect now and, and those have some obligations for employers.

Keegan Drenosky: Yeah, you know, on the deductions, as you talked about, I'm sure in your presentation in Connecticut, there's now, um, paid leave that will be another deduction from people's payroll.

Things like that. And things that an employee gives written consent for are fine. You know, deductions can't take pay. Obviously below the state minimum wage, that's where you would run into to issues. But on the pay transparency, that's, uh, in the more recent history for Connecticut and now Connecticut requires employers to disclose wage ranges.

To both applicants and employees upon either their request or at key points like a hiring or a promotion. And you know, I, I've seen now a lot of employers have employees that work in different states, whether that's remotely or in different offices. And so they have to be sort of aware, not just of the Connecticut law, but of laws in other states related to pay transparency.

So Massachusetts is now another state that's now going to require that, and we've seen that sort of, uh, uh, coming up as well. And New York, you know, has a similar law. So really that's an issue of, yes, Connecticut has it, but making sure you're complying with relevant state laws if you're advertising in other states potentially, or if you have employees working remotely in those places as well.

Dan Schwartz: Yeah, and employer still can't ask about salary history to applicants right.

Keegan Drenosky: Uh, that's correct. So it goes, you know, one way it's, this is pay transparency for the employees, but not going the other way for the employer.

Dan Schwartz: Yeah. So an employer can't ask an applicant how much they were paid at their prior job in, in sort of an effort necessarily to low Paul.

Uh, if you have a wage range, you have the amount that you're gonna pay people, then that's the range that's there. It's not. Obviously set in stone, but it should be consistent with what others, are paid at your company as well. Before we wrap up Keegan, I do wanna ask you about some of the emerging issues that are out there.

What's on your radar?

Keegan Drenosky: So on the radar is really other state laws. Um, like I said, Massachusetts has a new law and pay transparency and just really figuring out some other similar laws in in other states and making sure employers are looking across the spectrum. There's some laws like about predictive scheduling, which is really just giving notice to employees in advance if their work schedules are going to change Also.

Again, the remote work challenges, just trying to continue to figure out are we registered to do business in these places? Are we complying with everything we need to do from a wage and hour perspective? The AI time tracking tools, I, I think we touched on that a little bit already, but that's an interesting option.

I don't think you can rely solely on those. Is pe sort of caution with AI in general. 'cause they can miss count hours if they don't capture all the compensable time. But that is a tool that employers can start to use as long as they're doing it responsibly and not solely relying on that. And then specifically in Connecticut, we actually have a case pending at the Connecticut Supreme Court involving Amazon on whether security screening for employees is going to count as.

Paid time, uh, in terms of compensable time like we were talking about before. And that will give us some instruction, I think in, in the state of Connecticut on what type of time beyond even security screenings, but similar time when an employee is sort of engaged to wait needs to be paid. So those are some of the things we're sort of keeping an eye on.

We have some other. Interesting federal things that are on hold, like the salary thresholds. We don't think those are going up for the exemptions anytime soon with the current administration. That was another rule that came out, under Biden. That's sort of been not something that we think is gonna happen anytime in the near future.

And so it's just been, what's, what else is going to happen federally in the next few years. And then sort of looking at some of these more specific things on the state level.

Dan Schwartz: Yeah, I think if there's one thing that's been consistent at the federal level, it's change. Though some of the laws themselves are frankly static.

It's really the interpretation of some of 'em that keeps seeming to go back and forth on a seesaw. With the various administration. So something to keep an eye on, particularly with this Department of Labor. Uh, Keegan, this has been great. It sounds like it was a great presentation. Sorry I missed it.

But any final thoughts for employers?

Keegan Drenosky: Just that as you've said, even though the laws may not necessarily change, the interpretation of them does. And wage and hour laws and compliance really isn't static. It's something employers need to review annually at a minimum. And, you know, I think it's helpful to do internal audits so that the first time you find out their.

A problem isn't when the federal or the Connecticut DOL notifies you that they're gonna be auditing your workplace. So it's really important to just do that and fix any issues, you know, and contact your employment lawyer when you find those issues.

Dan Schwartz: Yeah, well said. I think the title of your program of paying it right is really appropriate.

It's really about building trust and fairness with employees and doing it right the first time and not paying twice, or paying lawyers to do it later on. So Keegan, thanks again for joining me.

Keegan Drenosky: Thanks, Dan.

Dan Schwartz: And thanks to everyone for listening to another episode of From Lawyer to Employer. If you've been listening, you know the drill. You can subscribe to this podcast wherever you get your podcast, whether it's Spotify, Apple Podcast, or another platform. If you wanna learn more about wage and hour compliance, you can visit Shipmangoodwin.com or subscribe to our employment law blog at Employmentlawletter.com. We will be back with another episode in a few weeks.

Until then, stay compliant and we'll see you again soon.

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