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Analyzing The Intersection Of Wage And Hour Laws With Corporate Governance

Most businesses that hire employees will have to plan for compliance with wage and hour laws. Often a business that is in the process of incorporating can include provisions in its Certificate of Incorporation or in the corporation’s by-laws to facilitate compliance procedures. Whether your business is just forming or finds itself in need of updates to maintain compliance with New York and federal wage and hour requirements, however, a visit with an experienced business law attorney may be helpful in developing a comprehensive and efficient compliance strategy. Reach out to a New York business law attorney at Schwab & Gasparini today by calling any of our four offices, conveniently located throughout the state. Call  (914) 304-4353 in Hudson Valley or White Plains; dial (518) 591-4664 in Albany; or call (315) 422-1333 to reach our office in Syracuse.

What Are Wage and Hour Laws?

In the United States, wage and hour laws provide the legislative framework for ensuring that all of the work done by each employee – often measured by the hour for compliance purposes, even when the employee’s job for the company is not considered an hourly position – is appropriately counted and that each employee’s pay, when all work has been accounted for, meets the minimum standards that apply in the governing jurisdiction. At the federal level, most wage and hour laws are spelled out in the Fair Labor Standards Act (FLSA) and enforced by the United States Department of Labor (DOL), whose Wage and Hour Division (WHD) sets out a number of guidance documents for employers to use as tools in preparing, and periodically updating, their procedures for ensuring compliance with federal wage and hour laws.

State, Federal, and Local Laws

Individual states can, and some do, establish their own wage and hour laws that are more protective of workers’ rights than the federal guidelines overseen by the DOL (state rules that would weaken worker protections are generally superseded by laws passed at the federal level). In some instances, even counties and municipalities may specify certain requirements or restrictions, so long as these do not conflict with laws enacted at the state or federal level.

Wage and Hour Laws in New York State

New York is one of the most interesting states with respect to the multi-way intersection of state, federal, and local laws regarding employment compensation because the wage and hour laws enacted at the state level and overseen by the New York Department of Labor (NYDOL) contain explicit provisions adjusting rules for not only minimum wage, but even how particular scheduling issues, such as split shifts vs. extended shifts, must be handled in particular areas within the state. Generally, these finer calibrations reflect an awareness among state legislators that both the cost of living and the practical impacts of “split shift” or extended shift (usually calculated as any period exceeding 10 consecutive hours) scheduling can vary widely within the borders of a single state.

New York encompasses everything from rural farm country to port-driven local economies to bustling urban centers. What makes sense in one environment may be unduly burdensome or even counterproductive in another, and New York State attempts to account for this variability in the state’s wage and hour laws. The downside to this accommodating approach can sometimes be that New York employers may find navigating their regulatory compliance obligations to be a somewhat complicated undertaking; many end up turning to a business law firm to seek advice on developing and maintaining compliance protocols.

What Is Corporate Governance?

Corporate governance covers a broad swath of considerations related to the administration of incorporated business entities. Some of the requirements for corporate governance will depend on the laws and commercial regulations of the jurisdiction in which the business is incorporated and maintains its primary address; in New York many of the applicable laws can be found in the state’s Business Corporations Law. Some aspects of corporate governance not subject to specific legal requirements or restrictions may be established in the company’s Certificate of Incorporation, submitted to the New York Secretary of State; generally, the corporation’s by-laws provided for under Business Law § 601 will set out more detailed coverage of anticipated contingencies.

How Can Corporate Governance Account for Wage and Hour Laws?

Wage and hour laws certainly address one issue about which company leaders often have questions: executive compensation packages. The specifics of these packages will typically not be spelled out in a company’s founding documents, as many organizations prefer to negotiate executive compensation on a case-by-case basis. However, a corporation’s by-laws can often establish some general parameters for the factors the company will consider in any new executive contract.

Executive work is in many cases also subject to Federal exemptions from certain wage and hour rules, particularly overtime pay calculations, but these exemptions typically require a minimum pay threshold; companies that tend to reward executives with performance-based bonuses and stock options may wish to keep these requirements for applying an executive exemption in mind. One of the most important ways a company’s corporate governance can account for wage and hour laws, however, is often to clearly designate a corporate officer responsible for establishing regulatory compliance procedures, for overseeing their implementation and ensuring that they continue to be followed at every level of the company hierarchy, and for updating these policies and procedures as needed in response to changing conditions in the business environment.

Common Wage and Hour Issues Companies Can Address Through Corporate Governance

In such a complex area of compliance, it can be difficult to develop a truly comprehensive list of wage and hour issues that will apply to every incorporated business. However, there are a few common themes about which companies often seek assistance with their regulatory compliance. Identifying these common areas of concern may be helpful for company leaders deciding what to include in a corporation’s by-laws, or evaluating the most efficient strategies for compiling documentation across the company hierarchy.

Recordkeeping

Often company leadership will feel an instinct to determine all other compliance measures first, and then decide how to document them. There is some logic to this approach, since the procedures to be followed can often suggest the most efficient means of documenting their implementation in day-to-day operation. However, it is important to bear in mind that compliance begins and ends with documentation; record-keeping requirements are given a distinct place within the FLSA, according to the United States DOL. Documentation can be important anywhere, but may be especially impactful with wage and hour issues, as who worked when and how the schedule was determined can easily become crucial matters for which your business may need to show that there was a clear policy in place for ensuring compliance with regulatory guidelines and demonstrate how the policy was followed in a specific instance. Developing clear procedural requirements for creating and preserving documentation to be followed by all employees, early on, and establishing a person who will be responsible for maintaining those records once filed – often but not always a dedicated compliance officer – can save a business many headaches later on.

Shift Scheduling and New York Spread of Hours Pay

A particular concern for New York employers may be ensuring compliance not just with federal wage and hour laws, but with New York’s laws regarding split shifts and spread of hours pay. The New York State Attorney General’s office explains that workers who are scheduled for “split” shifts, or for shifts lasting more than 10 hours, may be entitled to an additional hour of pay at the New York minimum wage rate. That minimum wage, however, can vary by region throughout New York State – and, important for employers to know, the employee pay requirements are determined by the location where the worker does his or her job, not by the location where the company has its corporate office.

Minimum Wage and Overtime Pay

Some corporate officers and members of the corporation’s board of directors may be exempt from FLSA minimum wage and, more critically in most cases, overtime pay requirements, according to WHD Fact Sheet #17B. Others may be eligible for the professional or administrative exemptions, depending on the circumstances. Because the regulations can be complex, and determining how they apply to a given situation may be even more so, many corporations find it helpful to discuss their compliance plans with an experienced business law attorney in their jurisdiction.

Employee vs. Independent Contractor Status

Many corporations will hire short-term workers to complete jobs whose frequency does not justify hiring a dedicated employee. Others may work regularly with individuals who supply services to the company but are not part of its organizational hierarchy. Often, these individuals would be considered independent contractors – a classification which has implications for FLSA compliance, business tax computations, and even workers’ compensation insurance. Since a company’s obligations regarding a worker tend to be higher when the worker is classified as an employee vs. independent contractor, many businesses are tempted to misclassify their employees as independent contractors.

These misclassifications can result in compliance issues across every regulatory area with which they intersect. Establishing clear expectations, in the corporation by-laws or even in a human resources handbook, for when a company’s need for work will be considered sufficiently frequent and central to operations to justify a new employee position – and when the frequency and centrality of work performed by an independent contractor indicate that it is time to move to an internal model – can be helpful in avoiding penalties for wage and hour violations, as well as possible violations of the tax code and other issues.

Contact a New York Business Attorney To Learn More

The intersection of wage and hour laws with corporate governance is far too complex and multi-faceted to cover comprehensively in a single overview. Additionally, the type and scope of advice and support your business might need can often depend on the stage of business operations at which you are seeking information. Consider scheduling a consultation tailored to your corporation’s needs by calling the New York business law attorneys at Schwab & Gasparini. You can reach us at any of our four locations throughout New York State. Call (315) 422-1333 in Syracuse, (518) 591-4664 in Albany, or (914) 304-4353 to reach our teams in Hudson Valley or White Plains.

Mon Mar 24 2025, 12:00am