Employers face more vigorous enforcement of
overtime and wage payment laws than ever before. Recently, the U.S. Department
of Labor (DOL) has

• 
  
  added 350 new wage-hour investigators;


• 
  
  launched a campaign titled “We Can Help” to
  publicize its wage-hour enforcement initiative; and


• 
  
  begun to refer claimants to private lawyers
  through its hotline “Bridge to Justice” arrangement with the American Bar
  Association.

Plaintiffs’ lawyers are energized to sue on wage-hour claims because the cases can be very lucrative. The result has been a
deluge of headlines reporting six- and seven-figure payouts, even by some of the nation’s most sophisticated employers.

What can your organization do to get ahead of this massive mobilization? The most effective course is to conduct an internal
audit before the DOL shows up at your door. An audit will enable an employer to identify compliance concerns and change any practices that might
present an unacceptable risk of liability.

Many employers have historically misunderstood—and therefore misapplied—the overtime laws. Here are three examples of high-risk areas:

1. 
   
   Assuming all “salaried” employees are
   ineligible for overtime pay. The fact is that even a salaried employee is
   entitled to overtime pay unless his or her job duties meet the specific tests
   for one of the overtime exemptions created by the Fair Labor Standards Act. If
   an employee is not receiving overtime pay simply because he or she is paid a
   salary, odds are high that the employer’s classification is wrong.

1. 
   
   Not counting all of the time that must be
   paid. Many employees do some preparatory work before their scheduled start
   time; or spend time to put on protective clothing before work; or punch out for
   unpaid “break periods;” or travel from place to place during the workday. There
   are many situations in which an employee might be entitled to be paid for time
   that is not being counted. Minutes a day might seem inconsequential, but when
   timekeeping practices apply across a large group of employees and continue for
   two or three years, the total amount of time and money involved can become
   enormous.

1. 
   
   Not counting all types of pay in calculating
   overtime. Commissions, incentive payments, and certain bonuses often must be
   included when you determine the rate to be paid for overtime work, even if the
   incentive payment is monthly, quarterly, or annual. Calculating overtime pay
   based solely on the employee’s base pay will often violate the wage-hour
   laws.

Wage-hour liability touches all industries. Employers in healthcare, insurance, banking, manufacturing, distribution, retail, and technology have faced high-profile cases involving huge liabilities due to the nuances of how the laws apply to people working in those industries.

In the face of the unprecedented public and private resources now being committed to enforcing wage and hour obligations against employers, it is simply not prudent to assume that you’re in compliance. Many employers are completely unaware of the legal errors in their classification, timekeeping, and wage payment practices. But ignorance of this law is no excuse. A claimant need not prove intent in order to establish a
violation and collect a recovery. Nor does an absence of employee complaints ensure clear sailing. The requirements of wage-hour laws cannot be waived by an employee’s expressed or silent acceptance of the pay arrangement.

Another important benefit of an internal audit is the potential availability of a legal defense in the event of a future claim. If your wage-hour practices have been established in good-faith reliance on an opinion from legal counsel, you may be entitled to a good faith defense against all or a portion of potential liability.

By: William Fallon