Sometimes an employer is approached by an employee with a special request, such as paying the employee “under the table,” or underreporting the employee’s hours to payroll, so the employee doesn’t lose certain government benefits such as low-income housing assistance. This proposition may be tempting for the employer, as it would allow the employee to take home more money and allow the employer to avoid paying payroll taxes, workers’ compensation insurance, and other State-mandated employer payments. However, this route can be extremely costly for an employer whose actions are discovered by the State.

Here are just a few examples:

  • If an employer does not have accurate records of hours worked and payments made, the Labor Commissioner may take the stance that the employer did not pay the employee anything for those hours. This can be a difficult presumption to overcome and can trigger times and penalties for failure to pay minimum wage, or even wage theft.
  • Even if the employer can prove that it paid employees for all hours worked, it may be required to pay substantial fines and penalties for not keeping accurate records and failing to provide workers with accurate pay stubs.
  • An employer may be subject to an audit by the Labor Commissioner as well as other government agencies for the previous three years.

The employer may believe that in conducting business this way he or she is being discreet, and that the employee, with whom he or she has a good working relationship, would never reveal such unlawful practices to the authorities. But all employers have a duty to abide by the law, and violating the law is not worth the risk.

To ensure that your pay policies and procedures are in compliance with current law, contact the Law Office of Karen J. Sloat at (760) 779-1313.