As a follow-up to my recent presentation to the talented entrepreneurs at Assets Lancaster about employment and business law issues, I wanted to create a resource that outlines some of the myths we hear associated with employment and the law.
This is by no means an exhaustive list, and if you have more questions or are wondering about a particular issue that you’ve encountered, feel free to contact us!
Myth 1: Paying employees under the table is permitted under the law.
Payment of employees under the table and failure to withhold Pennsylvania personal income tax on wages, tips or other forms of taxable compensation is illegal and considered tax evasion. The Pennsylvania Department of Revenue investigates tax fraud claims and such claims can be submitted here.
Similarly, the IRS also investigates claims for tax evasion for failure to withhold federal employment taxes. Each year, the IRS assesses billions of dollars in penalties to employers who fail to pay employment taxes and accurately report employee income.
Myth 2: An employee who is paid a salary is exempt from being paid overtime.
As discussed in this post by Christina Hausner, there are a number of circumstances in which salaried employees are entitled to overtime pay. All employees are entitled to overtime unless they are exempt under applicable law. The Fair Labor Standards Act provides specific rules as to who is exempt. Payment of wages on a salary basis does not make an employee exempt from overtime or minimum wage entitlement.
There are some pending changes to existing law proposed by the United States Department of Labor. What are known as white collar exemptions are now being rewritten to require payment of a greater minimum annual salary to qualify as exempt than is currently applicable.