The past year has witnessed developments in wage and hour compliance, including important court cases and new state and federal enforcement initiatives. Wage and hour issues continue to pose a significant risk to businesses.

Wage and hour is one case where ignorance is definitely not bliss. Many employers who find themselves on the wrong side of wage and hour law are well-meaning. They simply didn’t know their policies and practices were out of compliance.

Let’s review what happened in wage and hour in 2011, and peer into our crystal ball for some hints of what we might expect in 2012:

Employee Classification Remains a “Hot Button” Issue

In our 2011 Outlook, we noted that classification of workers as “employees” versus “independent contractors” was likely to receive focus from both the Federal Department of Labor (DOL) and state labor auditors.

This has proven true. As we reported in October in a roundup of 2011 DOL initiatives, the DOL’s 2011 budget included a request for $12 million to fund a multi-agency “Misclassification Initiative” targeting “industries with misclassification characteristics.” In September, the DOL and the IRS, along with at least seven states, signed a “memorandum of understanding,” pledging their cooperation in identifying and punishing employers who misclassify employees as contractors.

We can expect this issue to continue to receive close attention from both Federal and state agencies in 2012. The fiscal year 2012 Wage and Hour Division budget includes a request for $15 million in funding and the authority to hire 107 employees for the misclassification initiative to “support field investigator training activities and an additional 3,250 investigations.” Industries slated for scrutiny include construction, child care, home health care, grocery stores, janitorial, business services, poultry and meat processing, and landscaping.

Action Items for 2012: Make sure you thoroughly document your justification for every position you classify as an independent contractor. Check with your employment law attorney to verify your classifications are proper. Be sure to record all hours worked for any workers you have classed as contractors, in case any are later reclassified as employees by a DOL audit and you need to determine whether they’re due any overtime.

Changes In The Courts

Over the past several years, wage and hour lawsuits have turned into something of a growth industry. Sometimes, the court filings in wage and hour cases are very short on specific details. For instance, the filing may allege unpaid overtime but neglect to mention any dates and times when the unpaid overtime supposedly occurred. In some cases, identically-worded complaints have been filed against multiple employers. Some observers speculate plaintiffs’ lawyers in these cases simply toss out a litany of vague charges in hopes the employer will opt to settle instead of incurring the hassle and expense of a trial.

Some judges now seem to be losing patience with these “cookie cutter” filings. They’re demanding more in the way of specific details for each case, and dismissing cases where such information is not forthcoming.

With courts paying closer attention to the details of wage and hour cases filed, in the coming years we may see a reduction in the growth rate of these cases. They’re still highly lucrative for attorneys, so it’s unlikely the total number of cases filed will actually decrease any time soon. However, requiring additional detailed documentation of claims may mean the growth rate will slow to more manageable levels.

Action item for 2012: Review your payroll policies and procedures to ensure you comply with all applicable regulations. While courts are starting to rein in vague “cookie cutter” lawsuits, all companies with employees are still vulnerable to wage and hour claims. Your best defense is reliable, accurate time and attendance records, such as those produced by Acroprint timeQplus or AcroTime.

Off-The-Clock Work In Focus

By some estimates, 70% or more of employers are out of compliance with one or more provisions of wage and hour law. A problem area that’s been receiving more attention lately is off-the-clock work.

Here’s one typical scenario: a health care worker in a busy hospital or clinic starts on a scheduled half-hour lunch break. Part of the way through, a patient emergency arises, and they’re called back to work. In order to “count,” a meal break must consist of an uninterrupted half-hour in which the employee is totally relieved of work duties. Unfortunately, the time and attendance system is configured to deduct a half-hour meal break automatically every day.

Unless the supervisor goes back in and “adds back” that automatically-deducted half hour, the employee may have a claim for unpaid time. This problem is common in fields such as nursing and tech support, where employees are prone to being called at any time to deal with emergencies.

In other cases, employees are reading and answering work emails in their off-hours using their smartphone, laptop or tablet. If the company is short-handed, workers may be tempted to put in extra time outside normal working hours — perhaps at home — to keep up with the workload. Sometimes loyal employees may even volunteer to work extra hours off the clock to “help out.” They mean well, but federal law says overtime-eligible employees must be paid for all their work time.

Plaintiffs’ lawyers have noticed these issues. Some are aggressively seeking out instances of potential off-the-clock work. With more employees telecommuting and the proliferation of smartphones and tablets, we expect the situation to get worse in the future.

Action items for 2012: Establish clear policies regarding employee use of company voice mail and email during non-work hours. Make sure any overtime-eligible employees know they need to record all work time, even when they’re away from the office. (An online time clock such as AcroTime, which can be accessed over the web from virtually anywhere, could be ideal for this.) If your time and attendance system is set to automatically deduct time for meals, consider instead having employees clock in and out when they’re on meal breaks.

Summary

Overall, we expect 2012 will see continued litigation and an even stronger focus on enforcement from both the federal and state labor departments.

Prudent businesses should consult with their employment law advisor to verify their policies and procedures comply with all applicable laws and regulations. To further reduce risk we advise the use of a reliable, accurate time tracking system to ensure all employee work hours are recorded and properly compensated.

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