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A Guide To Employee Pay: Consequences Of Not Paying Your Employees

DHL, T-Mobile, and even Coca-Cola have been involved in a class-action lawsuit for not paying employees properly.

If your company is going through a bad patch, it may be tempting to attempt to save money by postponing or not paying workers who have been fired. As an employer, you have a legal duty to pay your workers. You must pay your workers if you have any at all, it’s as simple as that.

However, if you’re thinking about bypassing employee pay in a convoluted manner, we’re here to tell you that you shouldn’t. Keep on reading to learn all about the consequences of not properly paying your employees.

Employee Pay And The Three Pay Violations

Let’s start by covering the basics. These are the actual ways employers have violated the laws regulating the payroll system and employment pay.

The following are a few things to be aware of while dealing with federal and state employment authorities.

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Withholding And Deducting Without Consent

Except for withholdings mandated by law, a company cannot deduct money from an employee’s paycheck without their approval (FICA taxes, for example).

In the event of an audit, you’ll need proof of employee consent for any non-required deductions from wages.

Punishment By Withholding Pay

Even if an employee breaches corporate rules and is terminated under terrible circumstances, they are still entitled to their entire salary.

Trying to avoid paying any terminated employees their leftover wages is in direct violation of the laws.

Below-Minimum Wage Employment

If the employee’s earnings fall below the minimum wage, you can’t deduct sums from their compensation.

This applies to things such as shortages, employer-required uniforms, and instruments of the trade.

Understanding Employment Laws Against Nonpayment Of Workers

Law requires businesses to pay their workers, and this obligation extends to both the states and the federal government.

Let’s start by highlighting the federal laws.

Regulation of wages, overtime, recordkeeping, and youth employment are all responsibilities of the Wage and Hour Division, part of the U.S. Department of Labour (DOL). If an employer violates the Fair Labor Standards Act (FLSA), they might do so in one of two ways.

Paying non-exempt (hourly) workers their entire salary and any overtime due on their regularly scheduled payday is essential. It applies to employers that are suffering cash flow issues.

According to the Department of Labor’s standards, a salaried exempt employee may no longer be exempt if the employer reduces payments to the employee.

Overall, this is the point where you can make use of payroll financing to protect your business from any legal issues down the line.

State Laws

State rules governing the payment of workers may be stricter than federal regulations.

These situations need abiding by the rule of law that provides the greatest advantage to workers. As an example, some jurisdictions have greater overtime pay requirements than the federal mandate of extra compensation beyond 40 hours in a workweek.

These states require employers to pay overtime at a higher rate.

Employee Actions Are Protected

To retaliate against an employee who makes a pay claim, lodges an internal complaint, or makes a whistleblower report against a corporation would be a violation of federal law. It’s prohibited by law to retaliate in the form of non-payment, dismissal, or other discrimination.

Discharging an employee with garnished wages for a single obligation is likewise against the law. It’s under Title III of the Consumer Credit Protection Act). It also restricts the amount of money that you can take from an employee’s salary in a single week.

Final Employee Paycheck Laws

It is not required by federal law for companies to promptly pay out the last wages of departing workers.

The regulations of each state, however, dictate when you need to pay an employee’s last payment. Some of these regulations vary depending on whether you’ve fired the employee or they quit.

When you terminate an employee, you must pay them. “All wages due at the moment of dismissal,” according to Missouri law for example.

You must compensate employees who voluntarily leave their jobs on the final normal payday. Or, the following Friday if there is no regular payday, according to Vermont law.

The Payment Of Tipped Employees

Employee tips are the property of the employee and cannot be used for any purpose other than to benefit the employee. Paying tipped workers the federal minimum wage of $7.25 an hour is required by federal law, even if you utilize the usage of a tip pool.

Depending on the state, there may be more lenient guidelines for tipping staff to follow. Even though an employee’s tips are included toward their minimum wage, California law states that they cannot be used as a deduction.

Responding To Wage Complaints By Employees: The Basics 

Preventing salary disputes is as simple as keeping meticulous records of all wages given to workers. A state or federal authority will ask for this information first if your firm is accused of not paying its bills.

It’s important to pay attention if the complaint comes from one employee. As soon as possible, resolve this issue to avoid more aggravation for the employee Let them know that you’ll meet with them and provide them with a list of all of their payments. These records are accessible to the employee.

You, as the employer, are still obligated to pay the number of an employee’s earnings that have not been contested. Keep paying the ordinary portion of an employee’s compensation even if they claim they’re entitled to overtime, for example.

A federal or state agency is likely to be the source of the complaint if it involves more than one individual. Employees as a group have filed a complaint in this instance. An attorney representing the workers as a whole may file the complaint if it is part of a class-action lawsuit. Co-operation is key; don’t withhold information or tell lies.

The Consequences Of Not Paying Employees: Explained 

Any employee may be able to hold your employer liable for federal and state laws if they fail to pay you the agreed-upon compensation. We hope that our guide has shed some light on the importance of employee pay and ensuring that people get their pre-set wages and salaries.

And, if you’re in a bit of a financial pinch, then you should head straight to our finance section for tips on how to get emergency funding.

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