What if I Don’t Pay Employees on Time?
Delaying the payments of employees neither buys time nor saves money. Instead, it attracts legal liabilities that cost time, money, and brand reputation. While employees are vital to the company, a regular paycheck is the first priority of most employees.
Find out the legal reasons why you should pay employees on time and what happens when you don’t. Explore expert tips on handling bankruptcy and wage complaints so that you can troubleshoot invoicing mistakes.
Know The Law
Keeping aside the social obligations of not paying your employees, let’s focus on the legal obligations for now. Let’s start with federal labor law.
The Fair Labor Standards Act or FLSA sets the minimum wages, overtime costs, and manages employment records in the United States. For example, the FLSA specifies that employers struggling with cash flow must disburse full wages plus overtime pay for all non-exempt employees on their regular payday.
State laws on the other hand are sometimes more stringent than federal laws. Suppose the state’s minimum wage is higher than federal standards. In such a case, the employer is bound to disburse the state-specific wage to the employee.
If the employer does not follow the norms of the FLSA, it will be counted as a violation. Go through the following three impacts of employers failing to pay employees on time to avoid any unnecessary problems.
Zero Penalties For The Employee
Retaliating with discrimination, dismissal, or non-payment against employees who have previously filed a pay claim, gone through wage garnishment, or complaints both internally or externally is a federal violation.
Standard Payment Violations
The three types of pay violations that incur penalties are highlighted below.
- Deducting/Halting Payments Without Consent: Withholding or pausing payments without legal reasons and sans the consent of an employee is illegal.
- Holding Back On Payment As Punishment: Violation of company policies is not reason enough to withhold the payment of the employee.
- Billing Below Minimum Wage: Employers are not allowed to cut costs of business expenses from employee wages as it can result in earnings below minimum wage.
Breach of State Paycheck Laws
While federal laws don’t mandate immediate payment on paychecks of ex-employees, a few state laws do. This is because state laws differ widely between states and you must check individual state laws for more information.
For example, employers in Missouri must pay outstanding wages to the employee at the time of dismissal.
How To Pay Tipped Employees
When it comes to tips, federal and state laws unanimously agree that it’s the sole property of the employee. For employers who use a tip pool, federal law stipulates employees must be paid at least the federal minimum wage. State laws differ based on where you are. For instance, California specifies that tips can’t be used as credit for minimum wage by the employer.
5 Legal Actions Against Employers Due To Poor Payment Scheduling
What does the Federal Government do when you violate any FLSA rules? Do you need to worry about late payment fees? Find out from the below.
- The Secretary of Labor might legally address the back wages or file an injunction opposing the employer.
- Employees have the right to file a legal complaint if the company discharges or discriminates against them for filing a complaint or disclosing information about employees.
- Repetitive violations of FLSA regulations will lead to civil monetary penalties against the employer.
- Employers found to purposefully violate Federal regulations are liable for court costs, criminal charges, fines, and jail terms.
- Employees are free to file for back pay but this is not applicable for state government employees.
Two Things to Remember When Filing for Bankruptcy
Filing for bankruptcy does not relieve you from the responsibility of paying your employees, irrespective of whether the company is working or not. Based on the type of bankruptcy filed, a bankruptcy trustee will guide you on how to pay your employees.
The following lists two types of bankruptcy for employers unable to pay employees on time.
Chapter 11
Termed as reorganization or legal relief where the bankrupt company gets a fresh start, Chapter 11 keeps the business running during bankruptcy. During this phase, shortlisted employees are prioritized high while others are let go for cost-cutting reasons. The employee creditors are sent full or partial payments as per their claims at this stage.
Chapter 7
When an employer stops the business and liquidates the total assets of the company, the funds are prioritized for repayment by the bankruptcy trustee. While secured debts of the company are rated ‘highest priority’, employee payments or unsecured debts receive a high-priority focus.
Tips for Managing Employee Wage Complaints
Complaints created by a group of employees are taken up by state or federal agencies. In addition, class action lawsuits are sent by attorneys who represent group of employees. If you’re facing a wage complaint, check the following three tips on how to counterclaim it professionally.
- Keep a well-updated record of employee payments given these documents are requested in the first stage of investigations.
- When you have one disgruntled employee, handle it with utmost seriousness so that other employees remain calm.
- Proactively offer to share payment records with the complainant to resolve issues immediately.
Legally, the employer is responsible for paying outstanding payments that are free from disputes in cases of a wage complaint.
Conclusion
When in doubt, don’t lie. The trick is to share your documents with the authorities when required. One of the advantages of online invoicing include digitizing your payment records. It can help you make employee payments on time and avoid any unnecessary penalties, fines, or legal recourse.
