Episode 604 : You Can’t Pay Employees With a Free Lunch During Lunch & Learns

As your team gets the chance to sit down together and learn about something new during their break, and while eating a yummy lunch that they didn’t have to buy, keep in mind the following: being paid for the time during that session isn’t just a kindness, it is required by law in all circumstances. If you remember one of our previous episodes called “You Can’t Pay People in Chicken,” the same principles we discussed apply here! In that situation, Chick-fil-A got in trouble for trying to pay employees with chicken sandwiches, and in this situation, you will too! Sadly, providing lunch as pay, even if you add waffle fries, is a wage and hour violation. Listen to this week’s episode of What the Hell Just Happened?! to hear Paul Edwards and Harley Hartliep go over one of the all too common wage mistakes made and how to avoid them.

Transcript

Voice Over: You’re about to listen to an episode of What the Hell Just Happened?! Join Paul Edwards and his guests as they discuss interesting HR topics and solve some of our listeners’ submitted questions. 

 

Paul: And occasionally I’ll go off HR topic and talk about whatever I want to talk about. Think barbecue. Space exploration. Technology. Money. Managing. Business. Things that interest all of us.

 

Voice Over: We get a lot of emails with questions. Stay tuned for details on how you can submit yours to the show. And now let’s get started. 

 

Paul: So I’m joined by Harley from CEDR HR Solutions today as we talk about a couple of different kinds of wage and hour violations that we see happen in the businesses that we work with. I think that the takeaway here, before we get into the questions, (Well, one question that was sent to us, another question we just wanted to answer) I think the takeaway here is that the wage and hour laws that apply to us as small, medium, it applies to all employers: They’re known. There’s not a lot of gray area in these things, but we still see a lot of mistakes being made on how people are being paid, whether or not they’re being paid for things like training that happen in the office at lunch and that’s one of the things that we’re going to talk about today. So we’re going to touch on just a couple of things that have to do with wage and hour and hopefully you guys find this interesting. I think once you’ve done it professionally, it’s hard for…I guess if you don’t do it professionally anymore and you keep doing something, you could call that a hobby? I would call it a problem.

 

[laughing]

 

Paul: Like I’m missing some, you know…Stupid. I would call it a stupid. 

 

Harley: Well, okay, what about music? Does that count as a hobby for you? You kind of did it professionally. 

 

Paul: I did that professionally. 

 

Harley: See it to me, Paul, it sounds like you have a problem of turning your hobbies into businesses. 

 

Paul: See?

 

Harley:  That’s different, though. That’s a different problem. [laughing]

 

Paul: No, no. That’s not a hobby. 

 

Harley: Well, it started out as one I guess.

 

Paul: I will tell you this, that I had a piece of insight. I try to grab insight from different places, right?  And I can associate anything back to HR, but I’m not sure that’s where I was going with this. What was the insight I have? Oh! You don’t have to turn every good idea into a business. 

 

Harley: Yeah. 

 

Paul: But for me, what that meant or what that still means is that I shouldn’t spend the energy to turn it into a business in my head and let it occupy me for, like, four weeks, because I’m never going to do it.

 

Harley: Hmm.

 

Paul: But any time I think I have a good idea, I instantly want to incorporate it.

 

Harley: I want an example of these. Can I steal them for my own businesses? 

 

Paul: Yeah, you take all the ideas you want. 

 

Harley: [laughing]

 

Paul: I’ll have to think about it. Maybe it’ll come up here in the podcast. So everybody, Harley is with me today and we’re going to be talking about wage and hour. We could do hours and hours and hours on wage and hour violations. So for everybody who’s listening out there, we’re going to take a couple of instances that are pretty common. They happen in offices. They have a lot in medical and dental offices. So we’re going to focus on one of these issues there. 

 

Harley: Yeah.

 

Paul: And kind of in that platform. And then what was the other one? I don’t remember what the other example was. My brain’s fried. It’s from running too many “not businesses” in my head at the same time. Oh! Not paying people in chicken or paying them properly. I got that. Okay, so we had a podcast. It said you can’t pay people in chicken and Chick-Fil-A got in some trouble, if you want to go back and find that one. It’s one of our most listened to podcasts. Harley, I don’t know if you know this or not, but if you catch a complaint from the Department of Labor, whether it’s your state or the Federal Department of Labor, some states don’t have their own departments of labor, so employees in those states go straight to the feds with any complaints they have. If you catch a complaint from the DOL, they have the power to come in and audit everything. 

 

Harley: Yeah.

 

Paul: So they’ll come in and audit your time keeping records, your practices. They’ll look at your employee handbook to see if you’ve got a policy that says something like what we’re going to talk about today, like lunch and learns are unpaid, but you get a free lunch, whatever that looks like. We’ll come back to that, but the thing that most people don’t realize and I used to have one of these when I first started 17 years ago, one of “these” is a letter from the DOL to a person who became a member of ours. So they got this letter before they ever worked with us, and it was a page and a half and it included that they wanted all bank records. So it’s like an IRS audit too. They wanted all bank records going back for, I think they were allowed to go back for five years and they asked for all bank records for five years. So if you’re out there listening, and Harley, you might be thinking, well, why would the DOL around timekeeping or something like that want your bank records?

 

Harley: I have theories. I don’t know if they’re correct.

 

Paul: Take a guess. 

 

Harley: Well, I –

 

Paul: Wrong! 

 

Harley: [laughing]

 

Paul: I’m just joking. Go ahead.

 

Harley: I imagine they can line it up with payroll records. 

 

Paul: They can line it up with payroll records. And that’s true. That’s true, but they have a more nefarious purpose for doing it. What they’re going to do is audit to see if you’re making wage and hour mistakes when it comes to mis-categorizing an employee. So they’re looking for is, are you paying independent contractors? It’s coming out you know, they’re seeing it come out of your bank records and it’s generally going to be going in a check straight to your independent contractor. So it’s proof that you’ve mis-categorized the employee and you’re paying them as an independent contractor.

 

Harley: Totally. 

 

Paul: So, you know, that’s another wage and hour violation, and by the way, we’re not getting into that today. 

 

Harley: Not today. 

 

Paul: I’m not going down that rabbit hole, but if you’ve got employees – 

 

Harley: You calling a hygienist an IC? [laughing]

 

Paul: Just don’t trigger me on this. 

 

Harley: I’m sorry, I couldn’t resist. 

 

Paul: Well, that’s a good example. No, he or she is not, and neither is your associate doctor who’s doing general dentistry for your general dental practice. Neither is anybody for any kind of business who’s listening out there: If the person is doing the work of your business, they’re doing what you do, the service that you provide, then there is a very, very high likelihood of them being an employee and not an independent contractor. It’s not even likely – that’s the wrong word. They’re not your IC. So now let’s get into the wage and hour thing. There’s a couple of things I want to point out before we get started, and I think these are very important. The text size on your page is – 

 

Harley: [laughing] Incredibly small.

 

Paul: Is that like a point one, two or something? What is?

 

Harley: [heavy sigh] Oh Paul. You always call me out for the weird things that happen to me. Yeah. No, I don’t know. This is just how the printer decided to do it and I didn’t have the energy to print it again.

 

Paul: You must be really tired, because you know, there’s a button you can make – 

 

Harley: [laughing] Well, I didn’t realize it was doing it until I grabbed it off the actual printer, and, you know, it’s not in my office. I have to walk, quite a distance, across the hall.

 

Paul: Okay. The other thing that I want to share is…Yeah, I know that so far. 

 

Harley: It’s so far. [laughing]

 

Paul: The other thing I want to share, which is it has nothing to do with the subject that made me think about it, because I always…I don’t know why before I go into a podcast, I go look in the mirror to make sure I look okay.

 

Harley: [laughing]

 

Paul: But then everybody, we do film these. We don’t put the whole podcast up, but little clips and stuff show up. 

 

Harley: It’s really fun to get jump scared by your own face when you open Instagram. Ahh! Oh, it’s me.

 

Paul: Well, yeah. God, that’s me. So, you know, this morning I didn’t realize we were doing a podcast, so I just dressed like a normal person.

 

Harley: Good. Now everyone knows what you look like on a daily basis. 

 

Paul: Well, I just put, you know, I got a little tie-dye underneath a nice warm pullover because it’s cold here. 

 

Harley: It’s 60 degrees outside! 

 

Paul: I know. I think it’s 68. 

 

Harley: Is it 68?

 

Paul: So it’s cold. We’re in the southwest, everybody. We’re in Arizona, so it’s cold to us. As soon as it drops to 60, we’re just like, let’s build a fire.

 

Harley: Yeah. 

 

Paul: Yeah. Why was I telling that story? Because I’m just taking up valuable time. [laughing] People are listening. They’re like, “Get to it, man.” Oh! Yeah. We were doing interviews about a month and a half ago, and one of the interviewees said that they had caught some of our video footage and that I should do a better job of dressing up and be more respectful. [laughing] That’s not what they said, but that’s what they meant. They wanted me in a button down and stuff like that. 

 

Harley: This actually makes me think: We’ve put a few social media posts out recently that are art recreations of Paul, and it makes me laugh every time because you’re wearing a suit and a tie in the pictures. [laughing]

 

Paul: Okay. So I have a story, I have a suit and tie story. So when I was, I think turned 19, I lived with this couple. They were awesome. We were all good friends, and I just ended up being their roommate. You know, we’re all trying to pay rent and do whatever and they were a little older than me, maybe five or six years older, which at the time seemed a lot older than me. They were more adulting. I was still in college. 

 

Harley: Yeah. 

 

Paul: Anyway, for one of my birthdays they gave and I was just like, well, I’m wearing tie dye today, everybody. Back then I wore tie dyes freely, and tie dye shorts and tie dye socks, and I was a musician, you know, and I was whatever, you know? I was the epitome of not a dress up person.

 

Harley: Yeah and I have a visual. 

 

Paul: Do you have a visual now? Long hair, you know, really long hair. Played in bands, I guess I was rock star in my own mind, not anybody else’s. 

 

Harley: [laughing]

 

Paul: So they gave me a birthday card and it was a guy standing there and tie dye in his sandals, you know, with beard, not long hair and everything kind of looked like me. But in the reflection in the mirror and the birthday card was of a guy holding a briefcase with just a really nice suit on, and I was upset by it at first. Then they were like, “No, you idiot. It’s a compliment. It’s like, this is where you’re going. This is who we see you as is this, you know, you’re this person. You’re going to be up to things,” or I guess that’s what they meant by the suit.

 

Harley: That you like put off the suit and tie vibes while in your tie dye.

 

Paul: Yeah. That’s not what I thought I was doing. I was trying. I was really trying hard.

 

Harley: I’m going to be a cool rock star, guys. 

 

Paul: Yeah, don’t put this on me.

 

Harley: Don’t turn me into a successful businessman.

 

Paul: I don’t really think that suits and ties make someone trustworthy. In fact, I think the most untrustworthy people generally put a suit and tie on in order to cloak what is actually going on behind them. 

 

Harley: Yeah. 

 

Paul: But that doesn’t mean that a dude and tie dye can’t steal all your savings.

 

[laughing]

 

Harley: We’ve been down this road before, I think.

 

Paul: You know, the reason why they’re not in tie dye is because banks won’t hire them dressed that way. They make them put a suit on. 

 

Harley: Yeah.

 

Paul: Right?

 

Harley: It’s true. 

 

Paul: Okay. So we promised everybody we would talk about a couple of wage and hour things. Harley, you used to work in dentistry. Lunch and learns. Let’s talk about that. How would they manifest where you worked? 

 

Harley: Yeah, it was just a rep would reach out. They want to sell us something. Whether it be a line trying to sell, you know, Invisalign services or implants, whatever the case may be. They’d come in and say, “Hey, I’ll buy your whole team lunch from the restaurant of your choice and all you have to do is agree to sit down with me for an hour and listen to me pitch this product.”

 

Paul: Yeah. The other way we see it as lunch and learns where it’s a rep. They’re not trying to sell you something or they’ve already sold you something, and now they’re coming back to do the training. 

 

Harley: Right. 

 

Paul: And they want to spend an hour with you, you know, with a doctor in the team and kind of go through and explain whatever it is that you’re going to either be selling, providing or a new system you’re going to be using.

 

Harley: I’ve even had reps take us out to Topgolf. 

 

Paul: Yeah. So take you to something else to just kind of they’re just, you know, they’re wining and dining. 

 

Harley: Exactly. 

 

Paul: So the issue here is, is that also that what we hear come out of the mouth of the rep is, “The cool thing here is I’m going to buy everybody lunch that way we can just do this over lunch. I take care of everybody. I explain what’s going on and you don’t have to pay anybody.”

 

Harley: Right. 

 

Paul: And Harley, now that you work at CEDR? 

 

Harley: You have to pay them.

 

Paul: Yeah. If it’s associated with work, you have to pay them. So the lunch doesn’t count. 

 

Harley: Exactly. In this instance we’ve laid out for you? That’s on the clock time.

 

Paul: Yeah, and in most instances, there’s just not a lot of ways to get out of it. So for everybody who’s listening, whether you’re in a dental or medical office or you’re in some other kind of setting, buying people lunch and taking care of them is wonderful, and you should do that, but doing it in lieu of paying them violates wage and hour rules.

 

Harley: Right. 

 

Paul: And so, you know, going back to what I told you before, not everybody understands that the DOL can go into your bank records and start looking at how you’re paying people and how you’re classifying people. You probably also didn’t know that on their website at the very front of it they provide their own time keeping app. The Department of Labor provides a timekeeping app to employees and explained that this is for you to be able to keep your time on the side so that if you feel that you are not being paid properly, you can keep track of time in this application and then you can use it with us when you file a complaint against your employer. The other thing that’s on there is a phone number, which is, you know, most government agencies, I mean, it’s like Google. There’s no way to get in touch with them, of which they will answer the phone and there’s also an email address where you can push your complaints, too. So I’m just also sharing as we go through this thing, scary things about what the Department of Labor is up to.

 

Harley: I would love to know some statistics over how often that app gets used and how often violations are found. 

 

Paul: They gave it to us some time ago. They released this app about eight years ago. They keep improving it. [laughing] Which is not good. They had given numbers of the number of downloads that people had executed on and it was I don’t know what it was, but it was a really high number.

 

Harley: It was a significant amount.

 

Paul: Whether the employees are using it or not, it doesn’t matter. Let’s see. Just looking at my notes here. Okay. So we cover lunch and learns everybody can’t pay somebody, can’t pay them in chicken. If you go back to that, you can’t pay them in chicken. You also can’t pay them in a lunch.

 

Harley: You can’t pay them in Panera sandwiches. 

 

Paul: You can’t pay them in Panera sandwiches, but you sure can buy them some because they’re delicious. One other point I want to make is and I want to answer this question, which runs in the back of everybody’s mind if you’re a small business owner, which is a little bit about why would they care? Why would they come after little ol’ me? Like I’m too small and they won’t come after me?

 

Harley: I have a couple of counters to that. The “they” being the Department of Labor or the Government or whatever it is. Actually, the first point I want to make is Google exists and there’s a plethora of both good and bad information about time keeping wage and hour and this is a super hot topic across all kinds of subreddits where employees are and so employees are more informed and have access to more information than they’ve ever had before. So they can do research on their own, and whether they’re right or not, they can come to their own conclusions about whether or not they’re being paid properly. So, you know, 20 years ago, this didn’t exist. There just was really no…You could make a mistake, a wage and hour mistake and I don’t want to say get away with it, but it could go undetected for a while? Maybe forever. That is no longer the case. So that’s the first reason why you want to make sure you understand all of these rules around wage and hour, of which we’re just covering a few for you today. Going back to why would they care: If I told you, as a listener, that somebody was out there doing something to prevent you from getting paid everything that you’re supposed to get paid, what would you do? Well, most of our listeners out there, that rings a bell for them, that’s called an insurance company. You spend all of your time in a battle trying to scratch and get what is rightly yours from them as they try to hold it back. So there is a little bit of a cross reference there between the Department of Labor and their wage and hour division and us employers because we’re paying taxes and that’s the income. When you look at this across all the states, there are plenty of studies out there that show that billions and billions of dollars in taxes are not being paid into the system because of misclassification and wage and hour mistakes amongst employees. So the Department of Labor’s job is to keep their jobs and to collect the money and we’re out here making mistakes, and so they’re kind of after us, you know? Sometimes it’s not even a mistake. Sometimes it’s intentional.

 

Harley: Right? 

 

Paul: I mean, we just put this in the last newsletter of which probably when you listen to this, it wasn’t in the last newsletter, but we linked to an article where a home care company was refusing the DOL’s requests for all their records.

 

Harley: Oh yeah, I remember. 

 

Paul: You remember that? 

 

Harley: Yeah.

 

Paul: And so she was like, “I’m not providing you these records. You don’t have a right to them.” They just went to court and a judge told her, “You’ll provide the records or you’re going to be in jail tomorrow morning. So either provide them or go to jail.” So, I mean, there’s no there’s no hiding from any of this stuff. You have to comply with them once it comes around. 

 

Harley: I’m sure she just made the situation worse for herself. 

 

Paul: Harley, anything else for today before we let people out of here?

 

Harley: Well, the reason we keep talking about that early podcast episode about paying people in chicken is because we actually got a question from a listener. 

 

Paul: We have a listener question?!

 

Harley: We have a listener question.

 

Paul: Actually, I’m acting surprised. We’re starting to get more and more questions coming in, so many that we’re not able to answer all of them. We are committed to just picking one at least every episode and answering it. So ask me the question. I’ll try to be as succinct as possible. 

 

Harley: I’m going to read it from my tiny script that you made fun of.

 

Paul: Okay. 

 

Harley: “So I heard your podcast about paying people in chicken, which was hilarious, by the way.” 

 

Paul: I like this person already. 

 

Harley: They’re really buttering us up.

 

Paul: Do we have their name? Can we send them like a gift card? 

 

Harley: I don’t know. We could probably get it, but probably won’t say it on the podcast. [laughing]

 

Paul: No, we’re not going to say it on the podcast.

 

Harley: But we can get it, yeah. “But what if this person doesn’t want to be paid? I was going to pay a candidate for their working interview, but they said it would mess up their unemployment. So they asked me if I could just give them a gift card instead.”

 

Paul: Okay. A very reasonable human, a very reasonable human request on their part. They’re concerned. They don’t know that they’re going to get the job. You don’t know that you’re going to give them the job. You do want to work with them, maybe do a working interview or a skills test or have them come into the practice for a bit. So you don’t want to mess up their unemployment if you’re not going to hire them either.

 

Harley: Right? 

 

Paul: I mean, that’s just kind of, we’re all being human here, but the problem is, is that it doesn’t matter what they want. We got to go back to the Department of Labor and in this case, also, the IRS as an employer. You have an obligation to withhold taxes, pay the matching taxes, pay your unemployment insurance taxes, and also to cover somebody underneath your workman’s comp program. If you do not bring that person on properly and you just let them work for you 5 minutes, an hour or all day long or two or three days, then and then you pay them under the table? Then you are violating those laws. They are not violating them. They are not going to get in any trouble whatsoever. 

 

Harley: Exactly.

 

Paul: You get in trouble for that. 

 

Harley: They might even be the ones who filed the claim against you.

 

Paul: We’ve seen it happen several times. 

 

Harley: Yeah!

 

Paul: I’m not going to say occasionally. They just go and they’ve got to reapply for unemployment and they list you as an employer, even though they only work for you for a few hours.

 

Harley: Right. 

 

Paul: Also, I want to just kill this. I don’t hear as much or as often as I used to because I think I put out enough articles on it that maybe I killed it, but this idea that if you pay somebody less than $600, you don’t have to make them an employee is just wrong. It’s not true. It’s based on another rule which just basically says you don’t have to report income to legitimate independent contractors that’s under $600. And by the way, I’m not a tax expert, but the example of this is, is the person who mows your lawn, it’s your babysitter, it’s these little one off things that come along. You cannot take that idea, that concept and convert it over to your practice. 

 

Harley: Right.

 

Paul: It’s just not accurate. I think the other thing that I want to point out is that you just need to understand that if someone comes in and works for you, it’s to be paid and they need to be onboarded properly, even if you don’t think they’re going to make it, or even if you’re planning on working with five or six people. I hate to say it, but they fill out the paperwork. You should do a background check before you let anybody touch any medical records in your practice or children. 

 

Harley: HIPAA training. 

 

Paul: Yeah. You should do the HIPAA training. So the thing is, you’re doing the proverbial cart before the horse. I understand why people are trying to get around it to a degree because it seems like it would save you time, but really, how much effort is it?

 

Harley: Yeah, are the working interviews still sounding enticing to the listeners?

 

Paul: Yeah, I mean, we have a ton of guidance around that. 

 

Harley: Yeah and it’s no secret that CEDR advisors don’t love working interviews.

 

Paul: Well they’re not legal. So listener, I hope we answered your question. You can’t pay them in a gift card or anything else. I don’t care what they want. I mean I am human and I do appreciate it, but I don’t care what they want. You need to stay in compliance and I need you to do all the things that you would normally do to bring someone on. 

 

Harley: Have that conversation before you let them do the work.

 

Paul: And go to our website and look. Go to CEDR’s website: cedrsolutions.com and do a search for skills testing versus working interviews and educate yourself around that stuff. Alright, everybody, thank you for staying awake long enough to listen to what the hell just happened. What the Hell Just Happened in HR?! is that we discussed a couple of types of wage and hour violations. The fact that the DOL can go all the way into your bank records. You know, you got to be careful. You got to comply. You got to understand these rules. 

 

Harley: Thanks, Paul. 

 

Paul: Thanks, Harley.

 

Voice Over: Thanks for joining us for this week’s episode of What the Hell Just Happened?! If you have an HR issue, question, or just want to add a comment about something Paul said, record it on your phone and send it to podcast@wthjusthappened.com. We might even ask if we can play it on the show. Don’t forget to Like and Subscribe and join us again next week.

 

Jan 8, 2024

Friendly Disclaimer: This information is general in nature and is not intended to provide legal advice or replace individual guidance about a specific issue with an attorney or HR expert. The information on this page is general human resources guidance based on applicable local, state and/or federal U.S. employment law that is believed to be current as of the date of publication. Note that CEDR is not a law firm, and as the law is always changing, you should consult with a qualified attorney or HR expert who is familiar with all of the facts of your situation before making a decision about any human resources or employment law matter.