Once again, it’s time for my annual Wage and Hour Outlook issue, in which I attempt to read the tea leaves and predict the big wage and hour issues for the coming year.

But first, let’s take a quick look back at 2012.

Last year, I anticipated there would be three major issues in wage and hour enforcement in 2012:

  • More scrutiny of the classification of employees versus independent contractors.
  • Less patience in the courts for “cookie cutter” class-action lawsuits.
  • An increasing focus on off- the-clock work.

As it turned out, employee classification and off-the-clock-work were significant areas of concern for many businesses in 2012. Following the 2011 Dukes v. Wal-Mart ruling by the Supreme Court, 2012 did see decreased certifications for large class-action suits. You may recall, in Dukes the plaintiffs tried to certify a class containing millions of female Wal-Mart employees. The Supreme Court decided a group that large was too diverse to constitute a legitimate “class” for the purposes of a lawsuit.

So what can we expect for 2013?

A renewed focus on enforcement and compliance.

For 2013, the U.S. Department of Labor (DOL) has indicated three areas of attention:

  • Getting America back to work.
  • Keeping workers safe.
  • Helping workers provide for their families and keep what they earn.

They plan to not only maintain staffing increases from the previous four years for the Wage and Hour Division (WHD), but hire even more inspectors. They will also shift funding from lower-priority programs to allow more support for programs that have the most impact, and streamline their administration.

Areas that have been identified as higher impact include enforcement of the Fair Labor Standards Act (FLSA) overtime provisions and Family Medical Leave Act (FMLA) compliance.

Misclassification continues to receive attention.

The DOL proposed an increase of $14 million for the WHD to combat misclassification of employees as independent contractors. This includes $10 million for grants to the states to help them identify and recover unpaid taxes, and $4 million to hire 35 additional investigators at the WHD to follow up on misclassification complaints.

Additionally, there have recently been two bills introduced in the House of Representatives aimed at dealing with independent contractor classification. The first, the Fair Playing Field Act (H.R. 4123) was introduced by 33 Democrats. The latest, The Independent Contractor Tax Fairness and Simplification Act (H.R. 6653) was introduced by a Republican, Rep. Erik Paulsen (R-Minn.) and bears many similarities (and a few differences) to the earlier bill.

Both bills modify the “safe harbor” provisions that businesses have traditionally used to shield themselves from excess liability when they’ve been found to have misclassified employees as independent contractors. However, neither bill has any impact on whether a worker is considered an employee or an independent contractor for the purposes of wage and overtime under the Fair Labor Standards Act (FLSA). With two bills in play, one from each party, it is possible there may be a new law on the books before too much longer.

Action item for 2013: Now is not the time to relax your guard. If your organization makes use of independent contractors, I recommend you review their status with your employment law advisor to ensure they meet all the necessary criteria for that classification. If they don’t, either revise the terms of their employment to meet the rules, or reclassify (and pay) them as employees – including overtime, if required.

You should also accurately record all time worked by any independent contractors working directly for you, as well as agency-supplied temps. If the WHD later determines they should have been classified as employees, those time records could save you from paying unnecessary back wages and overtime. Otherwise, the WHD or the courts could use the workers’ own recollections or private time records as the basis for computing what you might owe. Even if the workers were supplied by an agency, you could still be found liable as a “joint employer.”

Make every minute count.

The WHD budget also includes an additional $6 million to add 57 inspectors charged with improving enforcement of FLSA overtime rules and FMLA compliance.

It appears likely the WHD will continue their concentration on lower-wage industries, such as food service, hospitality and retail. These types of businesses employ a large number of hourly workers, are under great pressure to turn a profit and as a result are very prone to off-the-clock work and other violations. However, any businesses are potentially at risk, so you shouldn’t relax simply because you’re not in one of these target industries.

Here are two areas that may require your attention in 2013:

  • Automatic lunch deductions: if you automatically deduct for lunch breaks, you must adjust the pay for hourly and salaried non-exempt workers whose lunch is interrupted or missed due to work. This is a particular problem in places such as hospitals and tech support centers, where employees may be called to deal with emergencies at any time.

  • The 24/7 virtual office: Sometimes it seems almost everyone has a smartphone these days. If your hourly or salaried non-exempt employees are retrieving voice mail, reading and responding to emails or otherwise conducting work outside the office, you will almost certainly need to pay them for that time.

Action items for 2013: If you automatically deduct for lunch breaks, ensure you have an easy and well-publicized method for employees to report when their break was interrupted or missed due to work, and stress to employees the importance of using the system.

Alternatively, you can simply require employees to clock out when they go to lunch and clock back in when they return to work.

In any case, your policies should address the topic of off-the-clock work, and spell out that employees are to record all the time they work, whether it’s in or out of the office. You should make sure your time tracking system supports this sort of robust, distributed time tracking.

For instance, our AcroTime online time clock works anytime, anywhere you have Internet access and a browser, such as on a PC or tablet. It also offers a smartphone app (iPhone and Android) and a telephony option to allow clocking in and out with any telephone, including landlines and standard cell phones.

2013: the year of more of the same.

Overall, I don’t foresee any major changes in wage and hour enforcement or legal proceedings in 2013 versus 2012. Business owners and managers should review the classification of all independent contractors to ensure they meet the necessary criteria. They should also continue to be vigilant to ensure employees accurately record all worked time, whether on-site or remote, and that they maintain complete, well-organized records of that time.

If you need to upgrade your workforce management system to meet the needs of a 21st century workforce, contact us or visit our online store. We have a variety of solutions available to meet the needs of organizations of all types and sizes.

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