Wage-and-hour compliance is one of the most complex—and costly—areas of HR management. At the 2025 HR Specialist Summit, Carrie Hoffman, labor and employment partner at Foley & Lardner LLP, reminded attendees that the Fair Labor Standards Act (FLSA) doesn’t grant employers much leeway. Because it’s a remedial statute, employers don’t get the benefit of the doubt. Exemptions are narrowly construed, the burden of proof is on the company and even small oversights can snowball into class claims.
Review job classifications regularly
Courts issued 172 certification rulings in 2024, with plaintiffs succeeding 80% of the time. That success rate reflects how easy it is to get classification wrong. HR teams should regularly audit how roles are classified—between contractor and employee status and between exempt and nonexempt categories.
Contractor vs. employee disputes often hinge on five factors:
Labels and agreements don’t decide the issue; what matters is the true nature of the working relationship and the level of independence involved.
For exempt vs. nonexempt roles, titles and pay method aren’t enough. The actual duties must align with one of the FLSA’s recognized exemptions—executive, administrative, professional, computer or outside sales. Entry-level roles, assistant managers and sales positions are especially prone to misclassification errors.
Get overtime calculations right
One of the most overlooked compliance traps is how overtime is calculated. All forms of compensation count toward an employee’s regular rate unless specifically excluded under federal law. Bonuses tied to performance, shift differentials and safety or attendance awards must be included when determining overtime pay.
A common mistake is using an “easier” calculation method that allocates bonuses or incentive pay to a single pay period. This often inflates or deflates pay inaccurately. The correct approach is to allocate compensation over the period when it was earned—usually the standard 40-hour workweek.
Track all hours worked
For nonexempt employees, the company bears the responsibility to accurately track hours worked. Even if employees fail to cooperate, the burden doesn’t shift. HR leaders should monitor for subtle forms of off-the-clock work, such as:
Automatic meal deductions can also create exposure if employees aren’t truly relieved of duties. “If someone’s working through lunch, that’s compensable time,” Hoffman said.
Travel, waiting and on-call time
Ordinary home-to-work travel isn’t paid time, but travel between job sites or during normal work hours generally is. Waiting time counts as hours worked when the employee can’t use the time effectively for personal purposes, and on-call time is compensable if restrictions prevent employees from freely using their time.
Correct errors quickly—and strategically
When a compliance problem surfaces, assess whether to correct it prospectively or retroactively. Future corrections draw less attention, but back-pay adjustments can limit legal risk if handled transparently. Tying changes to broader policy updates can also help frame them as part of continuous improvement rather than a reactive fix.
FLSA compliance is about what’s defensible. With plaintiffs winning four out of five certification rulings last year, even one misclassified employee or one uncounted hour can tip the scales. Compliance reviews should be ongoing, not occasional, and precision remains the best protection.
