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Where They Went Wrong and How to Prevent a Similar Wage and Hour Lawsuit from Happening to You

Last month, a New York Papa John’s franchise owner was hit with a $2 million Wage and Hour lawsuit. According to the Huffington Post, Papa John’s rounded down employees’ hours and failed to comply with overtime rules. also reported that the company paid employees the minimum wage of a tipped delivery driver, even when they performed kitchen duties or other non-tipped work.

The New York Attorney General issued a statement urging all food franchisors and business owners to “take steps necessary to ensure that their workers – the backbone of their business – are treated fairly and paid the wages the law requires.”

So where did Papa John’s go wrong? And what steps can you take to prevent a wage and hour lawsuit like this one?

Employee Time Rounding: Avoid at All Costs

Time rounding is adjusting employee punches within specific bounds. For example, if an employee punches in for work at 9:58 AM, rounding rules treat this punch as 10:00 AM. FLSA regulation allows employers to round time, but only in increments of up to a quarter hour. The New York Papa John’s franchise violated New York Wage and Hour law by rounding down employee time to the nearest whole hour increment.

As a best practice, employers should avoid employee time rounding. Employees must be paid for ALL time worked. In fact, failure to properly compensate employees for all hours worked is the most frequently-cited violation made by the Department of Labor’s Wage and Hour division.

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Unpaid Overtime: It’s the Law

Papa John’s failed to pay employees legally-required overtime. The FLSA mandates that employers pay overtime (1-1/2 time the regular rate of pay) to nonexempt employees for any hours worked beyond 40 per week. Employers run into trouble when they fail to calculate and pay overtime (as in the case with Papa John’s,) or when they cannot definitively prove that they did.

It’s important that your time and attendance system not only tracks hours down to the minute, but also automatically calculates overtime pay. Manual processes only leave employers vulnerable to errors. And unlike paper time sheets, automated time and attendance systems give employers a digital paper trail. Digital records have immediate credibility and can prove that you have calculated employee overtime correctly.

Different Pay Rates: Not All Tasks are Paid Equally

When employees perform work at different pay rates, it is absolutely necessary that you pay them correctly. In the case with Papa John’s, delivery drivers were paid $5.00/hour to deliver pizzas (the tipped minimum wage). However, they were paid the same rate to perform kitchen duties – an untipped job position.

Not paying your employees the correct rate of pay is one thing. But it also plays a major role in calculating blended overtime rates.  Calculating blended overtime rates can get very tricky, so having a time and attendance system in place that does this automatically can prevent you from making manual errors and facing a lawsuit.

Don’t make the same mistakes as Papa John’s.

Avoid a wage and hour lawsuit. Contact EPAY to learn how our time and attendance system helps employers track employee time down to the minute and calculate pay rates and overtime rules.