Pay and Payback. Navigating the Minefield of Wage and Hour Compliance

Transcription

1 Pay and Payback Navigating the Minefield of Wage and Hour Compliance

2 Pay and Payback Navigating the Minefield Companies navigating federal and state wage and hour laws often find themselves on the wrong side of right. Consider this example. The federal Fair Labor Standards Act (FLSA) requires companies to determine whether a position is exempt or non-exempt from overtime. Companies make their best effort to properly classify their positions but may not classify them the same way the U.S. Department of Labor (DOL) will. Guess who wins that dispute? Companies need to understand the intricacies of how to calculate overtime; what to consider work time ; how to handle lunch and rest breaks; what can be deducted from a final paycheck; how to handle non-exempt remote employees; who qualifies as an independent contractor; whether the company can use paid or unpaid interns; and hundreds of other wage and hour scenarios. Even the most knowledgeable HR professional can be left scratching her or his head. To further complicate the picture, Massachusetts implemented the Treble Damages law in July of The law mandates treble, or threefold, damages for a wage and hour violation, regardless of whether it was the result of a good-faith mistake, difference of opinion or interpretation, or willful or egregious conduct. Employers found in violation prior to 2008 would only be assessed treble damages when willful or egregious conduct was found. The potential of huge damage awards has brought a host of plaintiff s attorneys into the field, looking for clients and anxious for a chance to file a nonpayment of wages claim. In 2010, the U.S. Wage and Hour Deputy Administrator Nancy Leppink announced the agency would pursue an aggressive auditing and enforcement policy. Although audits can be focused on any area of wage and hour compliance, two areas specifically mentioned were misclassification of workers as independent contractors and misclassifying non-exempt employees as exempt to avoid the need to pay overtime.

3 How is a company selected for an audit? An audit may be triggered by employee complaints to the DOL; The Department of Labor may target certain industries or regions of the country; or An audit may be triggered by a random selection process. Companies of all sizes face the possibility of audit. What should a company do? First take this quick quiz to determine your familiarity with basic wage and hour information. Review how your company is handling these issues. If you get one or more questions wrong, or you were unsure of the answer, it may be time to get more information. Keep in mind, this is just the tip of the iceberg. Answers follow the question section. Questions 1. The Department of Labor estimates what percent of employers are out of compliance with wage and hour laws? a) 35% b) 50% c) 70% d) 100% 2. How many collective actions were filed in federal court in 2011 alleging wage and hour violations? An FLSA Collective Action is a lawsuit (enforcement action) on behalf of a large group of similarly situated non-exempt employees within a company. a) 4,000 b) 5,000 c) 6,000 d) 7, The Massachusetts Minimum Wage is currently: a) $7.25 per hour b) $8.00 per hour c) $8.10 per hour d) $8.50 per hour 4. True or False - Employers are free to hire interns as either paid or unpaid interns. a) True b) False 5. True or False - An employer who has a formal policy requiring employees to get supervisory approval prior to working overtime may refuse to pay the employee for nonauthorized overtime work. a) True b) False

4 6. True or False - If a job requires a college degree, it will meet the criteria to classify the job as exempt under the FLSA regulations. a) True b) False 7. If someone supervises two or more people, would the supervisor be classified as exempt or non-exempt? a) Exempt b) Non-exempt 8. When calculating overtime, what compensation needs to be factored in when determining the regular rate of pay? a) Incentive pay b) Discretionary bonus pay c) Shift differentials d) Retro pay increases e) All of the above 9. Many companies have an automatic lunch-period deduction for non-exempt employees consistent with lunch-break policy. Which one or more of the following presents an issue to the auto lunch period hours reduction? a) Technology the employee has a smart phone or tablet and can review s during lunch breaks. b) The employee sits at his/her desk during the lunch period. c) The employee is asked to take a call, or help a customer for a couple of minutes during lunch, but can finish his/her lunch break after the call. d) The company has employees attend lunch-and-learn sessions during the lunch break to review company policies or to participate in training. e) The employee is too busy for lunch, but will leave a half hour early at the end of the day. 10. The FLSA requires companies to pay for breaks when the break is equal to or less than: a) 10 minutes b) 15 minutes c) 20 minutes d) 25 minutes

5 Answers 1. 70% 2. 7,000 collective actions were filed in federal court in In fact since 2000, there has been a 400 percent increase in legal actions involving wage and hour violations. 3. The Massachusetts minimum wage for 2012 is $8.00 per hour which is higher than the federal minimum wage of $7.25 per hour. It should be noted that in the event the federal minimum wage is increased to $8.00 per hour, Massachusetts minimum wage will automatically be increased to $8.10 per hour. Massachusetts law states In no case shall the minimum wage rate be less than $.10 higher than the federal minimum wage. 4. True and False. Although it is legal to bring on unpaid interns in some circumstances, the Department of Labor has identified six criteria necessary to be met: 1. The training the intern is provided is similar to what the person would have obtained in a vocational or academic institution. Companies that incorporate classroom training as a significant part of the internship are more likely to be in compliance than those that do not. 2. The training provided is for the benefit of the trainee and not the company. 3. The training provided does not displace regular workers. 4. The employer derives no immediate advantage from the activities of the trainee. (In fact the employer s operations may be impeded by providing the training). 5. The trainee is not necessarily entitled to a job at the conclusion of the training period. 6. Both the employer and the intern understand the intern is not entitled to wages. When a company engages an unpaid intern and has that intern perform regular job duties similar to on-the-job training the company is unlikely to satisfy the six criteria. Example: A company brings on an unpaid intern and has the intern prepare PowerPoint presentations, review marketing materials, answer customer calls or package company mailings. These duties and ones similar are for the benefit of the employer and could possibly displace a regular worker or mean the company does not need to hire another worker since these functions are being performed by the intern. Unpaid internships are a frequent source of litigation. 5. Employers are required to pay employees for all hours suffered or permitted to be worked. The company cannot issue a policy that takes away the non-exempt employee s right to overtime if he/she does not first get supervisory approval. If an employee works unauthorized overtime, the employer should address this as a performance issue for failure to follow the approved overtime policy. But the employer must pay for the time worked.

6 6. False. A college degree alone is not enough to classify a position as exempt. The Department of Labor has a test that companies should use in determining whether a job is exempt or non-exempt. The test evaluates minimum weekly compensation; required education; autonomy of decision making; supervisory responsibilities and type of work performed. Although approximately 80 percent of jobs are relatively easy to designate as exempt or non-exempt 20 percent of your positions will require analysis to determine the correct classification. Job titles frequently misclassified include: Customer Service Representatives Administrative/ Executive Assistant Inside Sales Representatives 7. It depends. Many companies have working supervisors. These employees may be called supervisors or they may be called group leaders. Working supervisors often perform the same work as the people who report to them, but in addition they provide training when needed and may arrange schedules. If the majority of work performed is the same work as their non-exempt co-workers, the working supervisor would be classified as non-exempt. Supervisory responsibility in and of itself is not enough to determine someone s exemption status. Job responsibilities, education, supervisory responsibility, level of decision making and weekly salary are all factors considered. 8. All of the above. 9. All of the above pose potential risk to the company. Employees who access work during lunch are performing work. An employee who sits at his/her desk during lunch is likely to end up answering the work phone, accessing the computer for work tasks and answering work-related questions. Employees who interrupt their lunches to answer calls or questions are performing work during their lunch break. Employees must have the opportunity for a full 30 minute lunch break. Asking employees to attend training or company meetings during lunch is asking employees to work during lunch. 10. The FLSA requires that short duration breaks of 5 to 20 minutes must be paid. It should be noted that breaks are not required but if the company does offer a break of 20 minutes or less it must be paid.