Beware — Lawsuits on the Rise

ELT Inc., a corporate training firm, recently conducted a survey of 1,800 senior legal and HR professionals. The results revealed over one-third of the responding organizations had been clobbered with one or more wage and hour claims in 2009.

In fact, today wage and hour class action suits outnumber all other types of employment discrimination class actions combined.

Understandably, over half the respondents (54%) indicated their organizations were planning to increase spending on wage and hour compliance in 2010. That’s probably a good idea. According to Department of Labor (DOL) estimates, more than 80% of employers are out of compliance with one or more aspects of state and federal wage and hour laws.

Wow — that’s a lot of potential liability out there!

Meanwhile, some aggressive plaintiffs’ lawyers are seeking out disgruntled employees to file wage and hour suits. Why? Well, with so many employers out of compliance, it’s simple to find violations. With the burden of proof resting on the employer, these cases are relatively easy for the plaintiff to win. And they’re lucrative. The average federal class action settlement is $23.5M, most of which usually goes to the lawyers.

At the same time, the DOL has hired 250 additional examiners. They’re targeting industries such as healthcare, food service and hospitality for intense scrutiny, while stepping up compliance efforts in general.

So, what can you do to protect your organization?

Take Steps to Limit Your Exposure

Fortunately, there are several things you can do now to help identify and correct any out-of-compliance conditions and reduce your potential liability.

  1. Conduct a wage and hour audit — and act on the findings. Don’t wait for the DOL or state examiners to show up at your door. A wage and hour audit will help uncover problems so you can fix them before the examiners arrive.

    You can perform your own audit, but you may be better off having an outside expert conduct the exam. Labor laws are complex. What’s perfectly OK in one specific situation may be completely wrong in another. Unless you’re an expert in labor law, you may miss any number of potential trouble areas.

    Beyond that, it’s a bit like trying to proofread your own writing. Often typos may slip through because your eyes perceive what you think should be there — instead of what’s really on the page.

    In fact, we’ve heard more than once of labor law firms themselves penalized for wage and hour violations! While successfully keeping their clients in compliance, they missed problems in their own backyard.“Outside eyes” will often notice important things you’ve overlooked.

  2. Obtain, set up and USE a good time and attendance system. Many wage and hour complaints include a charge the employer failed to properly record employee time. Without accurate time records, it’s nearly impossible to ensure you always pay overtime-eligible employees properly.

    While handwritten timesheets are better than nothing, a traditional time clock or automated time and attendance system will provide more accurate results. Add a biometric component that prevents “buddy punching,” and you have a system designed to ensure accurate time recording.

    Once you have a good system, make sure all employees use it every day. Yes, even your salaried employees.

  3. Train your supervisors on proper policies and procedures. The most accurate time and attendance system in the world won’t help you if your employees are regularly allowed to “forget” clocking in/out or if supervisors are allowing or encouraging overtime-eligible employees to work “off the clock.”

    When supervisors and managers know and understand the correct policies and procedures, they can often identify issues before they become big problems.

    According to the ELT survey, over 60% of the respondents plan to implement a wage and hour training course in the next year. ELT estimates having a strong training program in place can potentially reduce damage awards by up to 66%.

  4. Treat complaints seriously, and never ever retaliate against an employee who files a claim. You should thoroughly and fairly investigate all wage and hour complaints. If you discover an issue, make things right, right away. Wage and hour issues can actually be more costly to your business than other issues such as discrimination or harassment.

While nothing will protect you 100% from wage and hour liabilities, following these simple steps can significantly reduce your potential exposure.

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