The Importance of Wage Audits
One of the most common—and costly—wage and hour mistakes businesses make is employee misclassification. When an employee is improperly paid a "salary" instead of by-the-hour, the consequences can be significant. If that employee worked more than 40 hours a week, the company may owe back wages for every hour of unpaid overtime, plus liquidated damages. In some cases, these liabilities can extend up to three years in the past, multiplying the financial impact.
The law makes exceptions for certain kinds of positions, including executive, administrative, professional, outside sales, etc. But figuring out when these exceptions apply can be complicated and missteps here are easy to make, which is why even well-intentioned employers can find themselves in hot water.
How can business owners protect themselves and minimize legal risks? By hiring legal counsel to conduct a "Wage Audit."
Wage audits provide an opportunity to review worker classifications, payroll practices, clock-in and clock-out records, and identify any areas of non-compliance. Having an attorney review your payroll and job structures before the DOL comes knocking can save both time and money, while giving you peace of mind that your policies align with federal and state requirements.
Wage audits can also reveal another common issue: pay equity. Even employers committed to fairness sometimes unknowingly pay men and women differently for similar work. Identifying these discrepancies early allows your business to address them internally, correcting issues before they escalate into discrimination claims. Just as importantly, tackling pay equity shows employees that your company values fairness and transparency, which helps with retention and morale.
Employer-Lawyer regularly conducts wage audits for our clients of all sizes. These reviews not only reduce legal risk but also strengthen workplace culture and employee trust. If your pay practices have not been independently reviewed within the past 3 years, now is an excellent time to schedule a wage audit to protect your business and ensure compliance with evolving labor laws.
