Anyone who has ever had to prepare a paycheck knows how complicated it can be to figure out the requirements of various federal and Texas laws regarding how to properly pay employees. The risk of a wage claim under the Fair Labor Standards Act or the Texas Payday Law makes compliance with the laws all the more important. This article will offer some tips and best practices for avoiding most claims, and for minimizing the risk of claims that are filed.

"Best Evidence" Rule

In wage claims, one of the most important things to keep in mind is the so-called "best evidence rule". It is most often relevant in claims involving allegations of breach of a wage agreement or failure to pay for all hours worked. Under that rule, whoever has the best evidence of a wage agreement, or of hours worked, or of some other aspect of a wage claim, will prevail on that point. Thus, an employer should always strive to have the best evidence when it comes to wage and hour matters. The good news is that strict compliance with wage and hour regulations usually has the beneficial side effect of helping the employer have the best evidence for use in defending against a claim.

Wage Agreements

It is difficult indeed to think of a situation in which it would not be a good idea to have a clear, written wage agreement with each employee. With such an agreement, as long as the conditions in the agreement themselves meet wage and hour law standards, all that an employer needs to do in order to not fear losing a wage claim over an alleged breach of a wage agreement is to follow the agreement. Set out each condition for earning pay. Be as specific as possible as to amounts, payment method, and payment intervals. Written agreements are even more important if there is more than one component to the compensation, such as hourly wage plus commission, or salary plus bonus. Whatever the specifics, outline them carefully and specifically and follow them exactly as time goes on. Changes to written agreements should always be in writing and signed by the employee.

Recording Working Time and Work Performed

Proper recordkeeping is not only mandatory under the FLSA, it is essential if an employer is to have the best evidence of hours worked. Become familiar with the requirements of Part 516 of the U.S. Department of Labor's wage and hour regulations (Title 29 of the Code of Federal Regulations). An employer that has sloppy or incomplete records of time worked can literally find itself at the mercy of an employee who claims to have worked extra time for which he or she was not paid. There is no need for such a thing to happen. Adopt a reliable timekeeping system - there are many available that involve varying degrees of technology and expense - learn it, apply it, and insist that employees use it consistently and properly. Failure of an employee to use the employer's system properly is usually not a workable reason to avoid paying for time that the employee claims, if there is some evidence of the work being done and no particular reason to disbelieve the claimant, but such failure can legitimately result in appropriate corrective action for failure to follow known work rules.

Disputes over time records should be worked out one-on-one with the employee if possible. Changes should be initialed by the employee. Avoid any appearance of coercion, since that can destroy the value of a disputed time record. Employees should sign their time records, even digitally if necessary. Include a statement above the signature line to the effect that the employee agrees that the record shows all time that he or she worked. The statement could be something like this: "The above record is a full and complete record of all time that I worked during the pay period shown. I certify that I did not work any time that is not shown on the above record."

Documentation of the work performed by each employee is important and should correspond to other records of time worked and earnings. In wage claim situations, employees sometimes claim that some work they performed was unpaid, while the pay they received was for certain things for which the employer believed the employee had already received pay. The employer must be able to counter such allegations with reliable documentation. For example, trucking companies should keep exact and detailed records showing which amounts were paid with which checks for which miles driven on which dates - otherwise, employees might be able to argue that certain checks were meant to cover miles other than the ones for which they are claiming payment. All pay documentation should be complete and consistent, including complete records of time worked, records of work performed, and records of wages paid and deductions made.

Document the Payment of Wages

Related to the issue of good recordkeeping for time worked is the practice of maintaining good documentation proving that your company has properly paid its employees. Employers that cannot prove they have paid their employees are at risk of wage claims from any employees who decide to claim that they never received their pay. The riskiest practice is to pay in cash, without a pay stub or receipt for the payment. This problem is sometimes seen in situations where the employer believes that the worker is "contract labor", or else a casual temporary worker to whom the normal rules supposedly do not apply. In most situations, of course, the worker will be an employee, and if he or she files a wage claim, the employer will be without a defense if it does not have clear proof of the wage payment. Although Texas law does not require a check stub or pay receipt along with the pay, it is a good idea, because it can help prevent fraudulent wage claims and minimize concerns among employees that their pay may not have been calculated correctly.

Enforce Your Work Schedules

A frequent problem involves employees who work through scheduled breaks, or show up early and start working, or stay late and continue working past their normal ending times. Employers sometimes think it is permissible to not pay employees for such unauthorized or unneeded work time. Unfortunately, that is not how DOL or TWC would view the matter in a wage claim situation. Under longstanding wage and hour regulations relating to hours worked, employers must count as hours worked any time that they either know or should know the employee is working. DOL's stance on that is particularly blunt: employers may not simply sit back and accept the benefit of employees' work time without paying for it, and if an employer knows or should know that an employee is working without authorization, the only solution is to use the employer's power to enforce its rules (see 29 C.F.R. 785.13). Put another way, employees working unauthorized or unneeded time is not a pay matter -- it is a disciplinary matter. The company has to pay for such work time, but does not have to be happy about it; the employer may administer appropriate corrective action to ensure that such a problem does not happen again. Handle such problems as what they are: rule violations.

Get Written Authorization for Wage Deductions

Under the Texas Payday Law, there are three categories of legal deductions from wages:

  1. deductions ordered by a court (garnishments for child support, alimony, and federal bankruptcy orders are the most common);
  2. deductions required or specifically authorized by a statute (such as payroll taxes, IRS tax levies, guaranteed student loan wage attachments, and administrative fees for certain garnishments or wage attachments); and
  3. deductions made for an otherwise lawful purpose and authorized by the employee in writing.

Notice that written authorization is only required for deductions in that third category. As it turns out, most problems under the Texas Payday Law have something to do with failure to get written authorization for such deductions. Every employer should have every employee sign a standard wage deduction authorization agreement covering the most common reasons why deductions might need to occur. There is an example of such an agreement in the section of this book titled "The A to Z of Personnel Policies".

Make a Clean Break with Departing Employees

One of the most frustrating situations for employers is that of a wage claim from an employee who the company thought was gone. We have seen several cases in which an employer believed that a former employee had either quit or was discharged, only to receive a wage claim notice claiming that after the work separation, the employee continued to work and earn wages that were never paid. Employers often lose such cases if they cannot document that the employee received clear notice that he or she was no longer on the payroll. For this reason, it is generally a good precaution to issue employees a formal notice of work separation listing the ending date of employment, clearly explaining that the employee is no longer an employee and is no longer on the payroll after that date, and letting the employee know when the company will issue the final paycheck. Give the separation notice to the employee in a manner that is documentable and verifiable, because if the employee decides later to claim that no one told him or her that they were no longer on the payroll, and that they were performing some kind of vague and usually unverifiable "duties" for the company, the employer may find itself unable to effectively counter such a claim.

The federal and Texas wage and hour laws are very technical and generally employee-oriented, so it is no wonder that many employers have problems complying with all of the requirements. However, getting pay-related agreements in writing, and sticking to written policies and agreements, should help an employer avoid the majority of wage claim situations that might arise.

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