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Wage and Hour Update: Three simple tips for Kentucky employers to protect against common wage claims

Many employers find wage and hour compliance to be among the most difficult concepts in employment law. Wage and hour laws impose numerous requirements, cover a broad range of conduct, and, to make things worse, vary from state-to-state. Fortunately for Kentucky employers, there are some simple and straightforward steps you can take to protect yourself against common problems. By taking the steps below, employers in the Commonwealth can substantially improve their ability to defend against certain common wage and hour claims.

1.    Consider utilizing class and collective action waivers, which can block large-scale claims and prevent smaller claims from being filed.

Courts have recently sanctioned a powerful tool for defending against both large and small wage and hour claims. Many wage and hour claims pose little risk when they are brought individually by a single employee. This is because most employees proceeding alone will have relatively small damages and, thus, it might not be cost-effective for them to pursue legal action. These same claims, however, can give rise to major litigation when many similarly situated employees join together as a group. For this reason, many wage and hour claims never get filed unless they can proceed as class or collective action lawsuits. 

Employers now may be able to block these group lawsuits. Approximately two years ago, the U.S. Supreme Court held that states could not prohibit parties from waiving their rights to pursue class and collective actions. This left the question of whether federal labor law could prohibit these ‘class and collective-action waivers;’ however, over the last year, many courts have held that it does not. (Kentucky courts have not addressed this topic, but there is a good chance they will find these employer-friendly decisions persuasive.) These courts effectively opened the door for employers to require class and collective waivers as a condition of employment, and thus bar employees from pursuing large-scale wage and hour claims, and also prevent many smaller claims from being filed in the first place. Every employer should consider utilizing these agreements, as they can dramatically reduce your exposure for wage and hour liability.  

2.    Make sure your handbook clearly addresses payouts for unused leave.

One common dispute arises when discharged employees claim that their former employers must pay them for any leave (such as vacation or personal leave) they accrued but did not use during their employment. In Kentucky, if an employee brings such a claim, an employer will be bound by the practice it communicates to its employees. If you have a policy that clearly provides that you will not pay employees for unused leave, and if you consistently apply the policy, you should not have to reimburse employees for any leave they accrue but fail to use. If, on the other hand, you do not address this clearly, employees could claim they believed you would pay them for unused leave, and thus leave you vulnerable. For these reasons, maintaining a clear and well-drafted leave policy is a simple and effective way to protect yourself from having to make extra payments to discharged employees.

3.    Require your employees to obtain your permission before working overtime.

Another common problem area involves hourly employees asking their employer to pay them for work it never asked them to perform. For example, one recent case involved fitness club employees who asked their employer to pay them for time they spent in its gyms after their shifts ended. Although there was some evidence that the employees were simply loitering, exercising, and conversing with friends, the employees claimed they were working and demanded payment. The court agreed and awarded the employees significant damages.

Unfortunately, Kentucky law requires you to pay employees for any time they work, unless you actively prohibited them from working. In other words, if you knew or could have known that your employees were working but did nothing to stop them, you owe them compensation. The best way to protect against this is to maintain a clear and well-drafted overtime policy. The policy should expressly prohibit employees from performing any work that you did not authorize in advance, and make it clear that you will not pay them for unauthorized work they perform outside their shifts. You should enforce the policy consistently and take steps to monitor whether employees are performing unauthorized work, including by making sure your supervisors are enforcing the policy. If you discover employees violating the policy, you should correct them through counseling and appropriate discipline. By taking these steps, you can help avoid a situation where you have to pay employees for work you did not want them to perform.

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