For many businesses, it’s become a scary world out there. A recent article in USA Today revealed the number of wage and hour lawsuits filed in 2011 was up 32% over 2008. According to law firm Seyfarth Shaw in 2011 there were over 7,000 wage and hour lawsuits filed in federal court alone.
The Department of Labor (DOL) and many states have significantly ramped up their wage and hour compliance monitoring. The DOL increased staff by 40% in the past two years. According to DOL reports, in 2011 they recovered $225 million in back wages for employees, representing a 28% increase over 2010.
Business wage and hour practices are under a microscope. Even inadvertent missteps can cost your company big money.
Let’s look at three of the biggest wage and hour pitfalls for businesses in 2012. If your organization has committed any of these blunders, you should take steps to correct the situation now, before it turns into an expensive lawsuit or DOL audit.
Some companies, in an attempt to save on overtime, taxes and employee benefits, classify most or all of their workers as independent contractors. That’s OK — as long as the workers really are independent contractors. Unfortunately, in some cases, the workers are actually employees, not contractors.
There are specific criteria that must be met in order for workers to be considered independent contractors. Any worker who doesn’t meet all the criteria is an employee.
In 2011, the U.S. Department of Labor (DOL) collected more than $5 million in back wages on behalf of employees who were misclassified as independent contractors. As previously reported, the DOL has also launched a misclassification initiative. They’ve signed Memorandums of Understanding with state and other federal government agencies. These allow the DOL and these other agencies to share information in an effort to combat the misclassification of employees as independent contractors.
The original initiative involved the DOL, IRS and seven states. It has since expanded to include 13 states, with Louisiana joining at the end of February 2012. States participating now include California, Colorado, Connecticut, Hawaii, Illinois, Louisiana, Maryland, Massachusetts, Minnesota, Missouri, Montana, Utah and Washington. It’s expected that more states will join as time goes by.
“Off the Clock” Work
Some employees have filed lawsuits claiming their employers forced them to work off the clock. Of course you’re aware that making employees work off the clock is illegal. However, even well-meaning employers can inadvertently allow overtime-eligible employees to work off the clock. Either way, if you don’t pay your employees for all the time they work, you could find yourself on the hook for big penalties.
For instance, let’s say one of your salaried non-exempt employees regularly spends time catching up on work-related email in the evenings and over the weekends. She says she’s able to spend more time researching customer questions and crafting her responses when she’s away from the day-to-day hustle and bustle of the office.
While you may admire her dedication, you will likely be required to pay her for that time. Usually you don’t have to pay for a quick, occasional check of voice mail or email. (The courts call these “de minimus” activities.) But any work-related activity that takes more than a few minutes will almost certainly be considered compensable time.
Required Attendance, No Pay
If you require overtime-eligible employees to attend a seminar or training program, team-building exercise or company social function, you will almost certainly have to pay them for that time.
The event must meet all of the following criteria before the time can be considered non-compensable:
- Attendance is completely voluntary. In some cases, companies have even been required to pay for “voluntary” events because their supervisors pressured employees, such that the workers felt they were effectively required to attend.
- The employees don’t perform any productive work during the event. Employees can serve as unpaid volunteers at your event, as long as they really are volunteers and the tasks they perform are unrelated to their job or your line of business.
- The event takes place outside of normal work hours. Any company event that takes place during work hours would be considered compensable time.
- If the event is a seminar, course, lecture or other educational or training program, the topic does not directly relate to their current job. If an employee stays after work to learn new skills unrelated to his existing job, this would not usually be compensable. So, for example, you could let employees use your office to hold after-hours knitting classes. You would not be required to pay them for that time (assuming they don’t work for you as knitters, of course). Training to help an employee do better in the job they already hold, however, is compensable.
Similarly, if you require employees to be available for work, but don’t have work for them to do right away, you must pay them for their waiting time. In general, whenever you require hourly or salaried non-exempt employees to make themselves available to you such that they aren’t free to use the time for their own purposes, you must compensate them for that time.
So, how can you protect yourself?
- Conduct a wage and hour audit. You can do this yourself internally, or consult with your employment law attorney. Document the criteria you used to classify your workers, particularly any independent contractors. Having this documentation may serve as a “good faith” defense in the event you’re later found to have misclassified anyone.
- Make sure all employee work time is recorded. Train your supervisors and managers about the issues “off the clock” work can cause the company. Install a good time and attendance system and insist that all employees use it to track their work time. Yes, even your salaried employees. Notify all employees that working off the clock is not permitted, and will subject them to disciplinary action.
Get a handle on work performed outside the office. If you have overtime-eligible employees who regularly telecommute or otherwise work outside the office, consider a solution such as Acroprint’s AcroTime for tracking their time. This online time clock can be used to clock in and out from anywhere the employee has Internet access and a browser. It even offers a telephony option for even greater flexibility.
You may also want to consider prohibiting overtime-eligible workers from performing any work (including checking email and voice mail) outside of regular work hours without their supervisor’s permission. If someone does unauthorized work after hours, the law says you still have to pay them for the time. However, you are also permitted to take disciplinary action for the rule infraction.
With a little foresight and care, you can avoid these and other wage and hour pitfalls. An important part of wage and hour compliance is to make sure you’re paying your employees for all the time they spend working. A reliable automated time tracking system from Acroprint will reduce your risk. Acroprint time and attendance systems ensure accurate recording of employee work time — and save you significant money on your payroll processing.