Avoiding Steep DOL Penalties
Wage and hour requirements are some of the most familiar employment laws known to employers, but that doesn’t mean compliance is easy. Employers can open themselves up to an investigation by the U.S. Department of Labor if they pay less than the applicable state minimum wage, misclassify their employees or discriminate on wages.
Supervisors play critical roles in an organization and represent the business from both a practical and a legal perspective. Because they are the front line of management, supervisors act as the eyes and ears of the employer. They are the ones best placed to spot compliance issues as they arise and to become aware of issues before they become crises. Because of their day-to-day role in delegating work and assigning hours, the supervisor is usually the immediate, first resource for employee questions and concerns regarding pay.
A supervisor must be intimately familiar with all applicable wage and hour laws and with organizational policies regarding overtime, timekeeping and paperwork. In addition, a supervisor must understand the difference between exempt and nonexempt employees in order to make management decisions (such as whether to approve a telecommuting request) and to ensure work is being performed.
In short, a supervisor’s actions often are where the rubber meets the road for following wage and hour laws. Failures and mistakes made by supervisors have a direct impact on organizations’ compliance efforts. There are many areas of wage and hour law that supervisors need to understand to avoid potentially costly pitfalls. Providing effective training to supervisors on these issues is like doing the routine maintenance on a car: it helps the organization run more smoothly and proactively and will save much more by preventing costly errors.
It is better to pay attention to routine matters to avoid paying a greater price due to one’s negligence. The same principle applies to wage and hour law compliance, where the slogan could be, “Pay me now, or pay more later.” Companies are required to comply with a plethora of ever-changing wage and hour requirements. These laws run the gamut from minimum wage, overtime pay and equal pay to meal and rest breaks and employee misclassification. Add to that the effect of also having to comply with state and local wage and hour laws and it is plain to see why employers can so easily make mistakes. And mistakes can be costly.
The 2018 Annual Workplace Class Action Litigation Report by Seyfarth Shaw stated that in 2017, settlements and payments of the top 10 private wage and hour lawsuits totaled $574.5 million. That is because, by their nature, wage and hour violations are well-suited for class actions. Wage and hour lawsuits cost only a few thousand dollars to prepare and have been certified as class actions at a rate of more than 70 percent in the past few years. As a result, wage and hour claims continue to be filed at among the highest rate of all employment actions, second only to ERISA claims in 2017.
In addition, wage and hour complaints to the U.S. Department of Labor often trigger systemic investigations, where the agency looks not only at specific claims, but also at the underlying “pattern or practice” of violations. Penalties can quickly add up as more and more violations are claimed. The Seyfarth Shaw report also reported that the top 10 government settlements in 2017 totaled over $321 million for DOL penalties. Already in January of this year, a California drywall company agreed to pay $944,000 in back wages and damages to settle DOL claims for overtime violations.
Employee complaints of wage and hour violations must always be taken seriously. A supervisor should be aware that such complaints are not required to be made in writing. An employee who makes an oral complaint is protected by the FLSA and its anti-retaliation provisions. If an employee voices an FLSA-related complaint during a conversation with his or her supervisor, the supervisor should immediately inform the employer so that steps may be taken to ensure the complaint is handled properly. The FLSA also allows for individual liability, which means that a supervisor who plays a key role in causing an FLSA violation may be held personally liable.
When it comes to working with independent contractors, a supervisor must take care to not exert too much control over the contractor in a way that renders the worker an employee under the FLSA. Generally, this means focusing on the end result of the contractor’s work, rather than the way in which the contractor gets the job done. For example, a supervisor should generally avoid requiring a contractor to work specific hours of the day; to use the employer’s facilities, equipment or processes; or to refrain from working for other employers.
A supervisor who practices an open-door policy in his or her department helps encourage employees to come forward with questions or concerns, including those regarding wages and hours. This is imperative for preventing employees from turning to an enforcement agency first. Although an employee has the right to do this, an employer should want the opportunity to investigate and address any possible violations first.
Providing new supervisors with training and experienced supervisors with refresher courses on wage and hour issues will help them to understand the importance of the organization’s wage and hour policies and practices. They then can be effective “eyes and ears” for the employer and catch issues when they are small and easily remedied. In short, the training is the “routine maintenance” for the organization that will help it avoid costly “breakdowns” down the road.