Labor Law Litigation Who Will the WHD Target in FY 2013? Summary According to its FY 2013 Congressional Budget Justification, the Department of Labor s Wage and Hour Division has identified priority initiatives and targeted specific industries for non-compliance with employee labor rights, requesting additional budgetary resources to support its efforts. In fact, 95 percent of the agency s additional budget requests will support three priority enforcement areas: protecting vulnerable workers, promoting sustained compliance and increasing industry compliance. Regardless of how the FY 2013 budget is ultimately enacted, WHD s priorities are unlikely to shift significantly even if its resources are lessened. Taking action to ensure FLSA and FMLA compliance will help protect companies from costly labor law investigations and litigation. www.attendanceondemand.com 2015 Attendance on Demand, Inc. All rights reserved. page 1
Meet the WHD The Wage and Hour Division (WHD) is an arm of the Department of Labor whose mission is to promote and achieve compliance with labor standards to protect and enhance the welfare of the Nation s workforce. Specifically, WHD administers and enforces minimum wage laws and working conditions for private, state and local government employees, protecting an estimated 135,000,000 workers in the U.S. and its territories. WHD s priority is to ensure that the most vulnerable workers are employed in compliance with wage and hour laws, enforcing specific provisions of a number of federal acts including the Fair Labor Standards Act (FLSA), which establishes minimum wage, overtime, recordkeeping and youth employment standards, and the Family Medical Leave Act (FMLA), which ensures employees receive unpaid, job-protected leave to care for personal or family medical issues. Penalty Box: WHD Priorities in FY 2013 The WHD has been increasing its enforcement investigations in past years, identifying compliance priorities and targeting companies and industries with low rates of compliance. According to the agency s proposed budget, FY 2013 will increase the agency s ability to investigate and penalize non-compliant organizations. WHD identified three priority enforcement areas: protecting vulnerable workers, promoting sustained compliance and increasing compliance among employers across specific industries. Protecting Vulnerable Workers WHD aims to increase the percent of vulnerable workers employed in compliance with laws the agency enforces, defining vulnerable workers as: Frequently employed in industries that rely heavily on subcontracting, franchising, temporary employment and/or independent contracting. Distanced from the beneficiary of their labor by multiple layers of contracting. Reluctant to complain of unfair or illegal treatment and lack opportunities or knowledge to exercise their workplace rights. Specifically, the agency plans to increase its oversight of Section 14(c) of the FLSA, which entitles employers certified under the Community Rehabilitation Program to pay sub-minimum wage to a disabled worker. A recent evaluation of 14(c)-certified employers showed low compliancy with the program s provisions, which the agency attributes to participants high staff turnover and inattention to program requirements, and the program s complex pay rate determination processes. Promoting Sustained Compliance Because overtime violations (especially off-the-clock hours) continue to be the largest cause of employee underpayment, greater FLSA overtime is scheduled for FY 2013. WHD will increase investigation and enforcement in industries it identifies as most likely to have overtime violations. In its budget justification, the agency states: Expanded investigations of overtime complaints, particularly in key high-risk industries, would allow WHD to pursue corporate and enterprisewide settlements and litigation[.] www.attendanceondemand.com 2015 Attendance on Demand, Inc. All rights reserved. page 2
Increased FMLA enforcement is also planned as more employees begin to exercise their rights to job-protected leave for family or personal medical reasons. Because FMLA applications vary from situation to situation, WHD expects an increase in employee complaints when leave is denied or leave-takers feel discriminated against. Employee misclassification, the result of employers incorrectly classifying employees as independent contractors, is another WHD priority in FY 2013. Misclassification denies a worker the benefits and protections afforded to employees by FLSA (such as overtime pay and unemployment benefits) and denies the government taxes the employer would pay on the employee s behalf. Increasing Industry Compliance WHD will target identified industries with high rates of minimum wage and overtime violations, especially among vulnerable workers. The agency plans to increase industry investigations, implement industry-wide compliance strategies and impose penalties and sanctions on violators to maximize the deterrent effect of the agency s enforcement. Targeted industries include janitorial, hotel/motel and agriculture. In the Crosshairs: Who Will WHD Target? As its priority list suggests, the FY 2013 budget shows that the majority of its requested resources will support FLSA, FMLA and misclassification investigations and initiatives. Wage and Hour Division Requested Increase in FY 2013 ENFORCEMENT PRIORITIES ADDITIONAL FTEs ADDITIONAL FUNDING FLSA & FMLA enforcement 57 $6.4 million Misclassification initiative 35 $3.8 million WHD plans to dedicate 95 percent of its $10.6 million requested increase to these priorities. Notably, the budget request also includes 80 extra FTEs, bringing the agency s headcount to 1,839 of which 60 percent (or 1,112 FTEs) will be investigators. WHD Full-Time Employee Breakout (Proposed FY 2013) Supervisors, analysts, technicians, administrative staff (40%) Investigators (60%) www.attendanceondemand.com 2015 Attendance on Demand, Inc. All rights reserved. page 3
An increase in investigators has significant implications for many organizations, especially those targeted by the agency s enforcement priorities. These include organizations that: Employ vulnerable workers, such as youth workers, disabled workers and farm workers. Rely heavily on a workforce of independent contractors. Participate in the FLSA Section 14(c) Community Rehabilitation Program. Operate in targeted industries (such as agriculture, janitorial, and hotel/ motel) or are at risk of FLSA non-compliance. Are at risk of misclassification, especially in targeted industries such as construction, janitorial, home health care, child care, transportation and warehousing, meat and poultry processing, and other professional and personnel service industries. Employers Facing Burden of Compliance Even more significantly, WHD has placed the burden of compliance squarely onto the employer s shoulders through the DOL s Plan/Prevent/Protect initiative. The initiative requires organizations to find and fix compliance violations prior to an investigation, making it clear that compliance is 100 percent an employer s responsibility. In addition, the WHD plans to eliminate compliance assistance for employers and its toll-free call center to offset its requested increases of investigatory resources. With WHD planning to pursue corporate and enterprise-wide settlements, and non-compliant organizations facing penalties and sanctions, let s examine how WHD means to target violators. Ready, Aim Tactics WHD Will Use to Target Violators WHD will target non-compliant organizations through four avenues: employee outreach; public awareness; increased investigative resources; and partnerships with federal, state and local agencies. Employee Outreach By reaching out directly to employees through community-based organizations, WHD hopes to lower the perceived risk of filing a wage-and-hour complaint and increase employee involvement in identifying violations. The agency also plans to educate workers and worker advocate groups on employment rights under FLSA and FMLA and provide a variety of ways for employees to report a potential claim. In 2011, WHD partnered with the American Bar Association (ABA) to offer an ABA lawyer referral hotline. This encourages workers with complaints to exercise their private right to action with a litigator specializing in wage-and-hour claims, while freeing WHD to pursue higher priority investigations. Public Awareness WHD will target its public outreach efforts to industries where workers are wary to report complaints. The goal is to not only educate the public on workers rights, but also lower the perceived risk of filing a wage-and-hour complaint and www.attendanceondemand.com 2015 Attendance on Demand, Inc. All rights reserved. page 4
increase benefits to a worker for filing a complaint. Furthermore, WHD plans to strategically publicize penalties and sanctions upon non-compliant entities to deter violations by other employers. Increased Investigative Resources In FY 2013, WHD declared it will increase its commitment to data-driven investigation, using data systems to track and evaluate compliance at both the industry and entity level. The agency has already begun evaluating and establishing compliance baselines in targeted industries and will continue implementing new technology for increasingly data-focused investigations. Additionally, an increased number of investigators means WHD can train investigatory teams to specialize in priority initiatives. Partnerships with Federal, State and Local Agencies Partnering with other agencies, the WHD will disseminate information on workers rights and employers obligations, tap into opportunities to gather compliancerelated information and develop compliance tools. Involving other agencies in misclassification initiatives will also help WHD enforce labor violations on state and local levels. Avoiding Investigation by Staying Compliant What can organizations do to avoid investigation? Since WHD s priorities revolve around FLSA, FMLA, and misclassification, the best insurance is for an organization to ensure its compliance with relevant provisions. FLSA Compliance In FY 2013, FLSA compliance is mainly focused on avoiding overtime pay errors. Ensure employee records, time-tracking and overtime calculations are correct by: Auditing employee exempt/non-exempt classifications to ensure no employee is mistakenly assumed to be exempt from receiving overtime pay. Encouraging employees to track all work hours through a centralized, easy-touse time-tracking procedure or system. Automating complicated pay rules and overtime calculations through your time and attendance system. Educating workers on their rights and encouraging them to lodge wage-andhour complaints with their employer. Following through with a transparent internal investigation. Training managers to uphold compliance procedures. FMLA Compliance Because WHD s FMLA investigations are primarily complaint-based, the best approach is to be responsive to employees FMLA requests. Provide timely responses to FMLA leave requests (FMLA stipulates a response must be provided within five days of the request). www.attendanceondemand.com 2015 Attendance on Demand, Inc. All rights reserved. page 5
Determine if an employee s leave time is FMLA-qualified and notify the employee accordingly. Accurately record all FMLA leave taken by employees. Ensure your time and attendance system is configured with the appropriate FMLA-leave pay rules to avoid miscalculations. Correctly reinstate employment benefits after an employee returns from leave. Train managers to uphold compliance procedures. Independent Contractor Misclassification The most significant factor separating an employee from an independent contractor is the nature of their relationship with the employer. Examine existing contractor relationships to ensure contractors maintain significant control over how they perform their work. Regularly self-audit employee classifications; carefully document your review and any classification changes that occur as a result. Review pay policies for accuracy, especially bonuses, deductions, salary calculations and overtime pay. FY 2013: Don t Be a Target Understanding WHD s priorities, upcoming initiatives and the strategies it will employ to achieve them is an important step for organizations seeking to avoid labor law investigations. Regardless of how the FY 2013 budget is ultimately enacted, WHD s priorities are unlikely to shift significantly even if its resources are lessened. Taking action to ensure FLSA and FMLA compliance and avoiding contractor misclassification will help protect companies from costly labor law investigations and litigation. This document simplifies a complex Act as it is understood by Attendance on Demand, Inc. It is not to be taken as legal advice. For further information about FLSA or FMLA compliance, please contact the U.S. Department of Labor at www.dol.gov or 1-866-4-USA-DOL. To find out how Attendance on Demand can help your organization, call 800-465-9980 or visit www.attendanceondemand.com About Attendance on Demand, Inc. Attendance on Demand supports the labor management needs of thousands of companies and more than a half million employees across North America. Launched in 2006, Attendance on Demand is a rapidly deployed, cloud-based solution that minimizes a company s risk and technology investment while providing advanced features for securely managing labor data calculating pay rules, scheduling employees, budgeting labor, and automating recordkeeping for labor law compliance. With standard uptime over the industry average of 99.995% and above average customer retention rates, Attendance on Demand removes the worry of maintaining expensive infrastructure. An extensive North American distribution network helps organizations use Attendance on Demand to reduce labor expenses and improve decision-making. Resource Wage and Hour Division. FY 2013 Congressional Budget Justification: Wage and Hour Division. Web. Accessed 2.2.12. <http://www.dol.gov/dol/budget/2013/pdf/cbj-2013-v2-09.pdf> www.attendanceondemand.com 2015 Attendance on Demand, Inc. All rights reserved. page 6 Attendance on Demand is a registered trademark of Attendance on Demand, Inc. 03/12 rev 02/15