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I’ll venture to guess that the driving force behind your decision to own or operate your business was not a passion for regulation. Managing hourly workers brings unique challenges, particularly when it comes to compliance. You have to navigate a complex set of federal, state, and local labor laws, and you do so while trying to keep your primary focus on operating your business successfully.
It’s also not a stretch to assume that you are committed to the well-being and overall job satisfaction of your hourly workers. After all, you chose a “people business”: one that puts the service your team provides to your customers at the center of your success. Compliance isn’t just about avoiding fines—it’s about creating a workplace that is fair, transparent, and safe.
So, what are the most common compliance issues we face, and how can we protect our business and our workers?
Common hourly compliance challenges
Minimum wage and overtime rules
Compliance with minimum wage and overtime laws is a fundamental requirement for employers of hourly workers. These rules vary by state, with some jurisdictions setting higher minimum wages or additional overtime regulations than federal standards. Employers must stay up to date on local laws to avoid costly fines, wage disputes, and reputational damage. Look up your state's labor laws here.
Recordkeeping in line with the Fair Labor Standards Act (FLSA)
The FLSA mandates that employers maintain accurate records of employees’ hours, wages, and other key employment details. Non-compliance in recordkeeping can lead to penalties and audits. Employers must ensure that their systems for tracking time and pay are thorough, transparent, and accessible for regulatory review.
Worker classification as exempt or independent contractor
Improper classification of workers as exempt or independent contractors instead of non-exempt employees is a common compliance issue. Misclassification can result in significant liability for unpaid overtime, taxes, and benefits. Employers must understand both federal and state laws to ensure workers are classified correctly.
Break and rest periods
Break and rest period laws vary widely across states, with California having particularly detailed requirements. Employers must be vigilant in providing mandatory meal and rest breaks, tracking when workers take those breaks, and compensating employees when breaks are not provided. Failure to adhere to these rules can lead to penalties and class-action lawsuits.
Off-the-clock rules
Employers are required to pay hourly workers for all time spent performing job-related tasks, including pre-shift or post-shift activities. Common violations include not compensating employees for time spent setting up equipment, cleaning workspaces, or attending mandatory meetings outside of regular hours. Strict policies and training managers to adhere to the policies are necessary to ensure all time worked is documented and paid appropriately.
How the right technology makes compliance easier
It’s normal to get frustrated. We invest time and money to make sure we’re doing the right thing for our business and our hourly workers, and yet we live in fear that small, unintentional errors can have big consequences. My experience, though, is that good technology can not only save time and expense but also alleviate anxiety and empower us to focus on the reasons we chose this business in the first place.
Stay on top of hours and breaks with a proactive time clock tool
Recently, I led the business transformation of Wise Sons Jewish Delicatessen in the San Francisco Bay Area. We urgently needed to reduce overhead expenses, and one of the highest-impact moves was to implement time and attendance technology. The result was a double-win: a big reduction in administrative work at the corporate office (we no longer needed to fill an open position!) and easier, more accurate tracking of hours, breaks, and shifts for payroll.
A modern, digital time clock can make a world of difference when it comes to reducing errors and staying compliant with labor laws. Look for a time clock solution that automatically flags discrepancies, such as missed punches or overtime, and geofencing features that prevent buddy punching of offsite clock-ins. This can save you from the hassle of manually reviewing and correcting errors, ensuring your records are accurate and payroll-ready.
Be vigilant about overtime hours and scheduling
Schedules aren’t static. I ran a large Jamba franchise group, and the smoothie business is the most weather-driven category I’ve ever seen. It’s impossible to forecast your guest traffic for the next two weeks because the weather forecast can change so quickly. We often found ourselves updating the forecast not only for tomorrow but for this afternoon! It was essential that we had a nimble scheduling system that enabled us to make changes and still remain compliant with work rules.
A strong scheduling tool should also help you maintain compliance with labor laws and avoid costly mistakes. It should track employee hours in real-time, identifying when workers approach or exceed the overtime threshold, and automatically calculate overtime pay according to federal, state, or local regulations. Customizable overtime rules are key, allowing businesses to align schedules with specific laws, such as daily overtime or holiday pay requirements.
Alerts and flags for overtime shifts give managers the chance to adjust schedules or redistribute hours to prevent violations. Additionally, detailed reporting provides insights into overtime trends, helping businesses optimize schedules and stay audit-ready.
Have a secure source of truth
There’s a saying I’ve heard from HR leaders through the years: “If it’s not documented, it didn’t happen.” You’ve provided all the right policies, procedures, and forms. You’ve handled performance matters with sensitivity and care. You’ve facilitated employee terminations to the spirit and letter of the law. But can you prove it? The unfortunate reality of our business climate is that sometimes we DO need to prove it in order to protect our balance sheets.
A secure and efficient system for managing worker records, documents, and e-signatures is essential for maintaining compliance in hourly businesses. The best tools offer centralized, encrypted storage to keep sensitive employee information safe while allowing you to control access based on user permissions. These systems should support quick imports and exports, real-time updates, and seamless access from any device, including mobile, making it easy to manage data wherever you are.
Digital document and e-signature tools further streamline compliance by enabling you to assign and collect essential acknowledgments, such as onboarding paperwork, policy updates, or offboarding forms. This ensures that key documents are signed and stored securely, providing an audit trail for compliance purposes. By replacing costly and inefficient paper processes, these tools help you maintain accurate, organized records while saving time and reducing errors.
Final thought
This year, I connected with Nadeem Bajwa, Co-founder & CEO of Bajco Group. Among his many businesses are over 250 Papa Johns restaurants. Nadeem shared some wisdom that I come back to when I feel discouraged by challenges in our industry:
Essentially, we’re all playing by the same rules. The same government requirements. The same compliance guardrails. I can whine about it all I want, but every bit of energy I put into complaining could instead be invested in problem-solving. With the right technology, risk management doesn’t have to be daunting and scary; it can be streamlined and automated. In fact, I can give myself a competitive advantage and a greater chance of success.
