In 2007, the Wage and Hour Division of the Department of Labor recovered a record $220 million in back wages for over 341,000 employees. The agency concluded 30,467 compliance actions and assessed over $10.3 million in civil money penalties. To make matters worse, President Bush’s budget proposal is for $194.1 million to the Wage and Hour Division, a $17.4 million (10 percent) increase that includes funding for 75 new investigators and field support staff. The budget also proposes an increase in the amount of fines that can be assessed against employers who willfully violate child labor laws.
To add fuel to the fire, violations of the wage and hour provisions of the Fair Labor Standards Act (FLSA) and the analogous state statutes (such as the Illinois Minimum Wage Act) are the single largest liability exposure for employers. Since 1997, wage and hour litigation has tripled while most other employment litigation has stabilized or declined. More wage and hour collective/class actions have been filed in recent years than all other types of employment class actions combined.
The bottom line is this. As an employer, you want to avoid a wage and hour investigation or lawsuit. This is a situation where an ounce of prevention is worth a pound of cure. The following are some basic strategies to put into practice:
- Avoid unfair compensation practices. Make sure employees are compensated in a consistent manner. If an employer’s pay practices are consistent, complaints are less likely to arise, and the employer will be in a better situation if DOL does launch an investigation.
- Understand the regulations. It is important that employers take the time and make a concerted effort to understand and familiarize themselves with the FLSA. It is the law, and if employers fail to follow it, they may face litigation or a DOL audit.
- Training. Train managers so they are fluent in the language of the FLSA.
- Pay past overtime due. If it is determined that an employee is wrongly classified as exempt, the employer should determine how many overtime hours the employee has worked in the past two years, then pay the employee the overtime due. The employer should also have the employee sign a release to free the employer from further liability. Paying past overtime due to employees now will be far less expensive than paying them in a DOL settlement.
- Respond to internal complaints expeditiously. If an employee files a wage and hour complaint internally, the employer should take it seriously. Since many investigations are prompted by an employee’s complaint, employers might be able to prevent an investigation by addressing an employee’s initial internal complaint.
- Compliance assistance from DOL. Various compliance tools and information are available on DOL’s website at dol.gov.
- Conduct a self-audit. Employers can hire attorneys to audit their companies—or they can do it themselves before DOL initiates an investigation. Conducting a self-audit helps ensure compliance with federal and state laws. As part of an audit, employers should: review job descriptions to determine whether they are still accurate, reflect the jobs being performed and reflect the skills necessary to perform the jobs. Review employees’ actual job duties to ensure that they still fall within the administrative, executive, professional, computer or outside sales exemptions. Make sure overtime for nonexempt employees has been properly calculated. For instance, bonuses and shift premiums should be included in the calculation of the regular rate of pay. Make sure the required posters have been hung in the appropriate places in the workplace.
Taking these steps will help decrease your organization’s exposure to wage and hour liability, deter administrative agency investigations, and, if litigation does occur, minimize exposure. While most employers follow these guidelines on a routine basis, it is always a good idea to review organizational practices and make adjustments as needed. IBI
