There are a lot of potential land mines when it comes to hiring people in the construction industry. The first is to determine if you are hiring someone as an employee or a subcontractor. You need to understand that it does not matter what you call them or what they call themselves; what matters is what the law calls them based on what they do for you. Classifying them incorrectly becomes a major legal land mine that can blow up your construction business. Let’s take a look at how to avoid an employee legal land mine.
Wage and Overtime Lawsuits
Once you have established that you are hiring an employee, do you know what things you need to have in place before you make the actual hire? The first thing to look into is whether you are paying them correctly. You need to know that paying an employee a salary does not mean they are exempt from overtime. This rule has limited exceptions and only applies to higher-level employees, like department managers and C-suite employees.
So, if you have a salaried employee who works more than 40 hours a week, you most likely must pay them time and a half for all hours over 40/week. What happens if you don’t? Not paying overtime can become a way bigger issue than you want to deal with. Take my client Super Painting Subcontractor (“SPS”), for example. Their business took off quickly. They needed painters and needed them fast, so they just started hiring anyone who was qualified, putting them on salary, and then putting them to work. About a year later, one of the hired painters became unhappy with SPS and how they ran their business and quit.
About two weeks later, SPS received a letter from an attorney claiming that the painter who had quit was not paid properly and was entitled to the overtime he was not paid, as well as penalties and attorney fees. Even when SPS tried to settle with their former employee, the attorney was not interested until after a lawsuit was filed in Federal Court against SPS. Want to know why?
The Cromeens Law Firm is here to protect you and your business.
Employment Law is one of the most challenging areas of business ownership and is often frequently overlooked. Our friendly and knowledgeable employment lawyers are here to help educate you on how to protect yourself, your workforce, and your business before something goes wrong. Work with us to equip yourself with the ability to properly evaluate your risks with greater confidence and ease.
Why Avoid a Lawsuit
Once this type of suit is filed against you, the court requires you to turn over a list of current and former employees that you have had over the last three years—including their contact information. All those current and former employees will receive a letter telling them that they may be entitled to unpaid overtime, and if they think that they are, they can join the lawsuit. So now SPS was not just dealing with one overtime claim. They had 10 potential employees they needed to address.
It ended up costing them $30,000 for unpaid overtime and penalties and an additional $20,000 for attorney fees, not to mention the stress something like this causes. If you have employees or are thinking of hiring, give us a call to make sure you pay them properly and don’t face the same legal land mine SPS did.
Sign up for our Webinar!
Register today for our Legal Land Mine Webinar on Thursday, November 11, 2021, from 12:00 PM – 1:00 PM CST. Karalynn Cromeens will give you her legal land mine checklist and the best practices to avoid litigation and issues down the road with your employees and your customers.
Employee Handbooks: Your Best Defense
Another must-have to think about if you have employees or are thinking about hiring employees for your business is an employee handbook with an updated safety plan. Having an employee handbook specifically catered to your business in the construction industry will save you so much time, money, and frustration. The employee handbook is the company manual that includes vacation time, employee write-up policies, your safety plan, and what happens if you get COVID—just to name a few. If a dispute arises, the best legal evidence to have is that all of your employees received, reviewed, and signed off on the employee handbook rules on their first day at work.
Conclusion: Don’t Get Sued
It is so important to always think ahead to avoid hefty consequences for you and your business. If you are interested in learning more about employment law and classifying your employees correctly, look at our previous employment blog. Call your friendly construction law attorney, and we will customize an employee handbook just for your company for a flat rate. We are here to be your business partner and protect everything you’ve built. Don’t delay and call us today to help you avoid legal land mines in your business before it’s too late.