Conducting an Internal Wage and Hour Audit
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1 Condcting an Internal Wage and Hor Adit Jonathan M. Kozak Jackson Lewis P.C. White Plains Jackson Lewis P.C.
2 Why take on an internal adit? Class Action lawsits in the Wage/Hor area have contined to skyrocket in recent years representing more than 90% of all class actions filed in the US (state and federal) -- reslting in millions in legal fees to plaintiffs lawyers becase: Employer violations are relatively easy to find Employers have little or no defense to most violations Attorneys fees are recoverable in all cases, along with DOUBLE damages Disgrntled former (or crrent) employees provide lead plaintiffs for class action sits Class exposre and, ths, class settlements can be sbstantial Fixing the problem is better than litigating it! 2
3 Common and Identifiable Isses Independent Contractors who are really employees. Spervisors or managers who are really not managing. Administrative Assistants who are not exempt administrators. Overtime eligible employees who are rotinely working off-the-clock. otside salespeople who don t really work otside/faceto-face anymore. Compter professionals who really do non-exempt systems admin, desktop spport, or help desk work.
4 What Are The Benefits & Risks? Benefits Risks Identify and respond proactively to employee wage and hor complaints Respond to changes in the law Prepare for or defend a DOL or state wage and hor adit/investigation Demonstrate good faith willingness and effort to meet or exceed obligations nder wage and hor laws Concerns abot confidentiality Unwittingly providing evidence that cold be sed in an agency enforcement action or litigation Alerting employees that there may be isses regarding compensation Uncertainty abot what the review might reveal and associated costs Raise employee awareness of the importance of wage and hor compliance Condcting review bt ignoring reslts and/or failing to follow-p, creating a record for a potential willfl violation 4
5 Identifying Reasons Or Motivating Factors For The Review Examples: Revised reglations Internal complaint DOL inspection / investigation Litigation Define role and docment in anticipation of litigation Attorney work prodct applies only to docments prepared in anticipation of litigation 5
6 Strategically Involving Otside Consel Utilize otside consel to direct internal review Engagement letter shold clearly state legal natre of review Consel shold control internal review and implement clear procedres for collecting information 6
7 Identifying The Scope & Content Of Review Deep, broad, scalable, iterative? Consider potential class litigation / certification isses Types of Reviews Exempt / non-exempt Off-the-clock Employees / independent contractors Overtime Timekeeping 7
8 Planning & Designing The Process And Procedres: Data/Information Gathering Who will do investigation? Attorney-client privilege is generally restricted to protecting legal advice Client cannot be compelled to answer what did yo say or write to the attorney bt may not refse to disclose any relevant fact within his knowledge If HR or consltant does investigation, manager, HR, or consltant cold be compelled to answer what did yo say or write What docments will be gathered? 8
9 Commnicating With Managers & Employees Before: Managers: Limit to review team. Employees: None. Dring: Managers: Consider limiting to pper-level employees if possible; isse clear Upjohn warnings before interviews Employees: Avoid interviews of employees that need to be reclassified/sbject to certain practices or procedres, nless information is not otherwise available or reliable After: (see Implementing Recommendations ) 9
10 Control The Data, Reslts, And Conclsions Of The Review And Any Reslting Reports Mark all docments privileged and confidential Avoid waiving any privileges Disclosre Reliance on information collected for affirmative defense Work prodct generated throghot review shold contain legal analysis and legal advice, especially if arising from fact-gathering interviews 10
11 Control The Data, Reslts, And Conclsions Of The Review And Any Reslting Reports What type of work prodct is best? It depends. Oral report Written report -- consider inclding: - Description of investigative process - Protocols established and sed dring review - Detailed smmary of facts determined in the review - Analysis of applicable wage and hor law and interpretations - A legal opinion as to whether there are compliance problems - An analysis of legal defenses regarding look back corrective action - Recommendations of corrective action 11
12 Implementing Recommendations Policy Changes: Reclassification Changes to Policies Changes to Practices Payroll calclations Consider how changes might be relevant in ftre litigation 12
13 Implementing Recommendations Commnications & Associated Considerations Risk with implementing changes is often to employee morale and other intangibles Consider copling wage/hor changes with other internal pdates or with changes in law or gidance Positive messaging especially where employees may see classification changes as demotions Consider tangible ramifications of changes Avoid income loss to employees 13
14 Implementing Recommendations Additional Remedial Measres may help establish good-faith defense and/or avoid willflness finding Revise job descriptions Implement or revise training for managers and/or payroll personnel Implement or revise manner in which legal condcts qality control related to wage/hor isses Backpay Release/Acknowledgments 14
15 THANK YOU With 800 aaorneys pracecing in major locaeons throghot the U.S. and Perto Rico, Jackson Lewis provides the resorces to address every aspect of the employer/employee relaeonship. 15
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